Corporations try to create hybrid securities that look like equity but are called debt because:
A)debt interest expense is tax deductible.
B)bankruptcy costs are eliminated or reduced.
C)these securities have lower risk than debt.
D)Both A and C.
E)Both A and B.

Question

Quizplus · Accepted Answer

By calling hybrid securities 'debt', corporations can take advantage of the tax deductible interest expense benefits while also reducing or eliminating bankruptcy costs, which are benefits typically associated with debt securities.

Corporations Try to Create Hybrid Securities That Look Like Equity