Which one of the following statements is correct concerning the direct costs of issuing securities?
A) Domestic bonds are generally more expensive to issue than equity IPOs.
B) The gross spread as a percentage of proceeds is the same for similar-sized IPOs and SEOs.
C) A seasoned offering is always more expensive on a percentage basis than an IPO.
D) There tends to be substantial economies of scale when issuing any type of security.
E) The costs of issuing convertible bonds tend to be less on a percentage basis than the costs of issuing straight debt.

Question

Quizplus · Accepted Answer

There tends to be substantial economies of scale when issuing any type of security. This means that as the size of the offering increases, the total costs of issuing the security will increase at a slower rate than the size of the offering, resulting in lower costs on a per-unit basis.

Which One of the Following Statements Is Correct Concerning the Direct