Which of the Following Statements Is Most Correct Concerning Flotation

question 15

Multiple Choice

Which of the following statements is most correct concerning flotation costs?

• A) flotation costs are the same for common stock, preferred stock and bonds because they reflect mainly printing costs and legal fees.
• B) flotation costs are generally higher for bonds rather than stocks because the dollar amounts involved are much higher, allowing for economies of scale
• C) flotation costs as a percentage of gross proceeds increase as the size of the security issue increases
• D) flotation costs are higher for common stocks than for preferred stocks and bonds due to the higher level of risk associated with owning common stock

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Definitions:

Foramen Ovale

An opening in the septum between the two atria of the heart in a fetus, allowing blood to bypass the lungs.

Optic Canal

A narrow passageway in the skull through which the optic nerve and ophthalmic artery pass to the eye.

Sella Turcica

A saddle-shaped depression in the sphenoid bone at the base of the human skull, holding the pituitary gland.