Which one of the following statements concerning debt issues is correct?

Question

Quizplus · Accepted Answer

It is common for firms to pay higher interest rates on term loans because they are typically riskier than public issues of debt. A prospectus is required for both equity and debt issues, and direct long-term loans are not required to be registered with the SEC. The size of the issue is not the only difference between a term loan and a private placement. Flotation costs for debt issues are typically less expensive than for equity issues. Therefore, the only correct statement is that firms often pay higher interest rates on term loans than on public issues of debt.

Which One of the Following Statements Concerning Debt Issues Is