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Multiple Choice Quiz
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1

Historically, general cash offers have had average flotation costs higher than pure rights offerings.
A)True
B)False
2

Assuming a price greater than zero, it is virtually impossible to overprice a rights offer.
A)True
B)False
3

Large rights offerings are more common in industrialized nations other than the US.
A)True
B)False
4

All else equal, the greater the subscription price of shares in a rights offering, the smaller the number of rights needed to buy one new share.
A)True
B)False
5

According to the textbook, direct flotation costs and the offering size (as measured by gross proceeds) are positively related.
A)True
B)False
6

According to the textbook, the market value of a firm's outstanding shares will most likely fall upon the announcement of a new equity offering.
A)True
B)False
7

According to the textbook, IPOs by firms and initial returns in IPOs are negatively related.
A)True
B)False
8

Empirical evidence suggests that, on average, the shares in initial public offerings have not been significantly underpriced.
A)True
B)False
9

The risk that new securities will be sold at a loss is transferred from the issuing firm to the underwriter in best efforts underwriting.
A)True
B)False
10

More than half of new corporate debt issued is sold via a private placement.
A)True
B)False





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