Issue Costs for Equity Are Higher Than Those for Debt

question 11

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 no economies of scale.

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Definitions:

Foreign Assets

Financial assets held in a country other than the investor's home country, including stocks, bonds, real estate, or currencies.

U.S. Net Exports

The value of goods and services exported by the United States minus the value of goods and services it imports, reflecting the country's trade balance.

U.S. Net Capital Outflow

The difference between the amount of U.S. assets bought by foreigners and the amount of foreign assets bought by Americans within a specific time period.

Chinese Currency

Refers to the official currency of China, primarily the Renminbi (RMB), with the yuan as the basic unit.