The Norton Bank of Illinois,has just issued trust preferred stock.What defense against risk is this bank making?

Question

Quizplus · Accepted Answer

By issuing trust preferred stock, the Norton Bank of Illinois is increasing its owners' capital, which can act as a buffer against potential losses and risks. Trust preferred stock is a hybrid security that has characteristics of both debt and equity, and it can help the bank boost its Tier 1 capital ratio, which measures the bank's ability to absorb losses. Therefore, the best choice is D. A, B, C, and E are not relevant as they do not relate to the bank's strategy of issuing trust preferred stock to defend against risks.

The Norton Bank of Illinois,has Just Issued Trust Preferred Stock