Questo 49 New common stock is more expensive than retained earnings to compensate for Answer saved Points out of 1 Hag question Select one O A risk OB

Solution 1

Option 4 is correct

Common stock is more expensive than retained earning as the issue of new shares will lead to another floating cost, and using retained earning will save that cost

Option 1 is incorrect

Diluting the shareholding of existing shareholders will lead to more risk.

Option 2 is incorrect

Issuing of more equity shares will lead to dilution of shareholding and in the end it will lead to more payment of dividend

Solution 2

Option B is correct

As the coupon rate is less than the YTM of the bond. Hence the bond is trading at discount

Option A is incorrect

Because if a bond is trading at premium, its coupon is more than the YTM

Option C is Incorrect

Rating does not have any applicability in this question

Option D is incorrect

The information is sufficient to asnwer the question.