Even though the firm may pay a lower interest rate on a private placement, it will pay higher out-of-pocket costs than a public offering.
The interest rate is usually higher, and the related costs are lower.

Question

Quizplus · Accepted Answer

The statement is incorrect. Private placements typically have lower out-of-pocket costs than public offerings because they do not require the same level of regulatory compliance and do not involve the same marketing expenses. However, the interest rate on a private placement may be higher due to a perceived higher risk by investors or lack of liquidity.

Even Though the Firm May Pay a Lower Interest Rate