Which of the Following Statements Regarding Commercial Paper Is False

question 11

Multiple Choice

Which of the following statements regarding commercial paper is false?

• A) With dealer paper, dealers sell the commercial paper to investors in exchange for a spread (or fee) for their services.
• B) With dealer paper, the spread increases the proceeds that the issuing firm receives, thereby decreasing the effective cost of the paper.
• C) The minimum face value is $25,000, and most commercial paper has a face value of at least $100,000.
• D) With direct paper, the firm sells the security directly to investors.

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Definitions:

Foreign Corporation

A business entity that is incorporated under the laws of a country different from where it conducts its operations or has its principal business activities.

S Corporation Election

A tax election made by small business corporations with 100 shareholders or less to be taxed as a pass-through entity, avoiding double taxation on corporate income.

Shareholders

Individuals or entities that own one or more shares of stock in a public or private corporation, thus having a financial interest in the company's performance.

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, as the cost of producing each additional unit decreases with the increase in total output.