Which of the Following Statements Concerning Common Stock and the Investment

question 6

Multiple Choice

Which of the following statements concerning common stock and the investment banking process is NOT CORRECT?

• A) If a firm sells 1,000,000 new shares of Class B stock, the transaction occurs in the primary market.
• B) Listing a large firm's stock is often considered to be beneficial to stockholders because the increases in liquidity and reputation probably outweigh the additional costs to the firm.
• C) Stockholders have the right to elect the firm's directors, who in turn select the officers who manage the business.If stockholders are dissatisfied with management's performance, an outside group may ask the stockholders to vote for it in an effort to take control of the business.This action is called a tender offer.
• D) The announcement of a large issue of new stock could cause the stock price to fall.This loss is called "market pressure," and it is treated as a flotation cost because it is a cost to stockholders that is associated with the new issue.
• E) The preemptive right gives each existing common stockholder the right to purchase his or her proportionate share of a new stock issue.

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Definitions:

All-You-Can-Eat

A service model usually found in restaurants where customers pay a fixed price and can consume as much food as they desire.

Equity Market

A marketplace where shares of publicly held companies are issued and traded, either through exchanges or over-the-counter markets.

Bond Market

A financial market where participants can issue new debt, known as the primary market, or buy and sell debt securities, known as the secondary market.

Appropriate Mix

The optimal combination or proportion of various elements to achieve a specific goal, often used in the context of investment portfolios.