When a firm announces an upcoming seasoned stock offering, the market price of the firm's existing shares tends to:

When a firm announces an upcoming seasoned stock offering, the market price of the firm's existing shares tends to:    A.  increase. B.  decrease. C.  remain constant. D.  respond but the direction of the response is not predictable as shown by past studies. E.  decrease momentarily and then immediately increase substantially within an hour following the announcement. Refer to section 15.6

44.

The total direct costs of underwriting an equity IPO:    A.  tends to increase on a percentage basis as the proceeds of the IPO increase. B.  is generally between 7 and 8 percent, regardless of the issue size. C.  can be as high as 25 percent for small issues. D.  excludes the gross spread. E.  excludes both the gross spread and the underpricing cost. Refer to section 15.7

45.

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. Refer to section 15.7

46.

Existing shareholders:    A.  may or may not have a preemptive right to newly issued shares. B.  must purchase new shares whenever rights are issued. C.  are prohibited from selling their rights. D.  are generally well advised to let the rights they receive expire. E.  can maintain their proportional ownership positions without exercising their rights. Refer to section 15.8

47.

To purchase shares in a rights offering, a shareholder generally just needs to:    A.  pay the subscription amount in cash. B.  submit the required form along with the required number of rights. C.  pay the difference between the market price of the stock and the subscription price. D.  submit the required number of rights along with a payment for the underwriting fee. E.  submit the required number of rights along with the subscription price. Refer to section 15.8