In undertaking a seasoned equity offering (SEO), why do firms almost always hire an underwriter via negotiation rather than competitive bidding?
a. The SEC mandates negotiation for SEOs (except in rare cases).
b. The selling process can be problematic because of informational asymmetry problems.
c. Negotiation actually results in a lower underwriter spread.
B
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Which of the following constitutes a group?
A) Students waiting in line to sell their textbooks at the end of the semester B) The office support staff of a sales office C) Students working on a final project which determines if they pass or fail D) All of these are groups.
Which of the following statements is FALSE?
A) A convertible bond can be thought of as a regular bond plus a special type of call option called a warrant. B) On the maturity date of the bond, the strike price of the embedded warrant in a convertible bond is equal to the face value of the bond divided by the conversion ratio—that is, the conversion price. C) Calling a convertible bond transfers the remaining time value of the conversion option from shareholders to bondholders. D) If the stock price is low so that the embedded warrant is deep out-of-the-money, the conversion provision is not worth much and the bond's value is close to the value of a straight bond—an otherwise identical bond without the conversion provision.