Corporations Try to Create Hybrid Securities That Look Like Equity

question 45

Multiple Choice

Corporations try to create hybrid securities that look like equity but are called debt because:

• A) bankruptcy costs are eliminated or reduced.
• B) these securities have lower risk than debt.
• C) both debt interest expense is tax deductible; and these securities have lower risk than debt.
• D) both debt interest expense is tax deductible; and bankruptcy costs are eliminated.