Which of the Following Statements Is FALSE

question 49

Multiple Choice

Which of the following statements is FALSE?

• A)The one advantage of a cash offer is that the underwriter takes on a larger role and,therefore,can credibly certify the issue's quality.
• B)SEO underwriting fees average about 5% of the proceeds of the issue and,as with IPOs,the variation across issues of different sizes is relatively small.
• C)As with IPOs,evidence suggests that companies overperform following a seasoned offering.
• D)Often the value destroyed by the price decline can be a significant fraction of the new money raised with a SEO.

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Definitions:

Credit Ratings

Assessments made by credit rating agencies regarding the creditworthiness of an issuer of certain types of debt, including corporations and government entities, impacting interest rates and terms of loans.

Call Provision

A clause in a bond or other fixed-income security agreement that allows the issuer to repurchase and retire the debt before its maturity date, typically at a premium price.

Redeem Provision

A clause in a financial contract allowing the holder to exchange a particular financial instrument under specified conditions, often before maturity.

Investment-Grade Bonds

Bonds that are rated by credit rating agencies as having a lower risk of default, making them a safer investment.