The Cost of Preferred Stock Is Typically Higher Than the Cost

question 13

True/False

The cost of preferred stock is typically higher than the cost of long-term debt (bonds) because the cost of long-term debt (interest) is tax deductible.

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Definitions:

Federal Reserve District Bank

One of the 12 regional banks in the Federal Reserve System of the United States, each responsible for implementing the country's monetary policy within its specific district.

Reserve

A portion of funds or resources set aside for specific future use, often related to monetary or commodity resources within financial institutions or government reserves.

Excessive Reserves

Funds held by banks over and above the legal reserve requirement, not required but possibly maintained for additional safety or for other purposes.

Required Reserves

Required Reserves are the portion of depositors' balances that banks must have on hand as cash, according to central bank regulations.