The cost of debt is
A) less than the cost of equity
B) greater than the cost of equity
C) equal to the firm's interest rate
D) greater than the cost of preferred stock

Question

The cost of debt is​
A) ​less than the cost of equity
B) greater than the cost of equity​
C) ​equal to the firm's interest rate
D) ​greater than the cost of preferred stock

Quizplus · Accepted Answer

The cost of debt is typically less than the cost of equity because debt holders have a higher claim on assets in the event of liquidation and thus require a lower return compared to equity holders.

The Cost of Debt Is​

The Cost of Debt Is