Issue Costs for Equity Are Higher Than Those for Debt

question 107

Multiple Choice

Issue costs for equity are higher than those for debt for all of the following reasons except:

• A) equity issues have higher administrative costs.
• B) underwriting stock is riskier than underwriting bonds.
• C) equity issues involve significantly more time to sell.
• D) equity issues have lower economies of scale.

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Definitions:

Scienter

Knowledge of wrongdoing or fraudulent intent, particularly in legal contexts involving deception.

Section 11

Often refers to a specific provision in a legal document or piece of legislation; the exact meaning depends on the context.

Securities Act of 1933

A U.S. legislation enacted as a result of the stock market crash of 1929, requiring that offers and sales of securities are registered, providing investors with truthful information on securities.

Liability

Legal responsibility or obligation that arises from actions or as a result of a contractual agreement, potentially requiring the liable party to compensate for damages or losses incurred.