Which One of the Following Statements Concerning Issue Costs Is

question 65

Multiple Choice

Which one of the following statements concerning issue costs is correct?

• A) The underwriters pay the spread.
• B) Taxes are an indirect underwriting cost.
• C) SEOs tend to be less costly than IPOs.
• D) Straight bonds are more costly to issue than convertible bonds.
• E) The total direct cost as a percentage of gross proceeds for an IPO tends to decrease as the size of the offer decreases.

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Definitions:

Market Risk

Also known as systemic risk, it's the potential for investors to experience losses due to factors that affect the overall performance of the financial markets.

Unique Risk

Referred to as unsystematic risk, it denotes the risk linked to a particular company or sector.

Firm-specific Risk

Risk associated with an individual company, as opposed to the market as a whole.

Efficient Frontier

A graphical representation in portfolio management that shows the best possible investment portfolios that offer the highest expected return for a given level of risk.