The Third State Bank of Denton has decided to issue stock through a trust company and borrow the funds from the trust company.This stock pays a fixed dividend and because of the way the stock has been issued it is tax deductible.What way of meeting their capital needs in the bank taking?
A)Issuing common stock
B)Issuing preferred stock
C)Issuing subordinated notes and debentures
D)Selling assets and leasing facilities
E)Swapping stock for debt instruments

Question

Quizplus · Accepted Answer

Issuing preferred stock that pays a fixed dividend and is tax deductible will meet the bank's capital needs. This approach allows the bank to raise funds without diluting ownership or control, and the fixed dividend payments provide a predictable source of income for investors. Additionally, the tax-deductible status of the dividend payments reduces the overall cost of capital for the bank.

The Third State Bank of Denton Has Decided to Issue