Question

Which statement is correct? The underwriters pay the spread. Taxes are an indirect underwriting cost. Seasoned equity offerings (SEOs) tend to be less costly than IPOs. Straight bonds are more costly to issue than convertible bonds. The total direct cost as a percentage of gross proceeds for an IPO tends to decrease as the size of the offer decreases.

Answer 1

Answer:

The correct statement is Option No. 4 which is "straight bonds are more costly to issue than convertible bonds".

Explanation:

Option 4 "straight bonds are more costly to issue than convertible bonds" is true because generally convertible bonds offer low yield , so it is the lowest cost for issuers.

Answer 2

Answer:

The statement that Straight bonds are more costly to issue than convertible bonds is true

Explanation:

Convertible bonds are bonds issued by a cooperation to a bondholder and this bond can be converted to shares in the company's stock when the bond holder decides to do that. these kind of bonds are easier and cheaper to issue when compared to straight bonds because of its lower interest rate.

Straight bonds have higher yields when compared to the yields generated from convertible bonds and this in turn makes it more costly to issue because the higher the yield a bond can offer the costlier the issuing of that bond in the financial market.