Which one of the following statements is correct concerning the costs of issuing securities?
A)Domestic bonds are generally more expensive to issue than equity IPOs.
B)Abnormal returns are rarely associated with seasoned issues.
C)A seasoned offering is typically more expensive on a percentage basis than an IPO.
D)There tends to be substantial economies of scale when issuing securities.
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

Economies of scale in issuing securities mean that as the amount of money raised increases, the cost of raising each additional dollar decreases. This is because many of the costs associated with issuing securities are fixed or do not increase proportionally with the size of the issue.

Which One of the Following Statements Is Correct Concerning the Costs