Question

Private placements can be advantageous, compared to public issue, because: I. Private placements are cheaper to market than public issues. II. Private placements may still be sold to the general public under SEC Rule 144A. III. Privately placed securities trade on secondary markets. A. I only B. I and III only C. II and III only D. I, II, and III

Answer 1

Private placements can be advantageous, compared to public issue, because of A. I only.

In the field of business, when a stock or share is offered to one of the previously known investors of a business, then such a kind of placement is referred to as private placement.

Private placements are more advantageous than public issues because as there is already a bond with the investor, hence a private placement is more cost-effective or cheaper. Also, for a public issue, most of the  cost has to be put in to find a new investor with whom the business can come to terms, hence, in order to cut of all these costs, private placements proves to be more advantageous rathen than a public issue.

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