The cost of debt measures the cost of a bank loan,while the cost of preferred stock is used as a proxy for the cost of a new bond issue.

Question

Quizplus · Accepted Answer

The cost of preferred stock is not used as a proxy for the cost of a new bond issue. The cost of debt is still used as the measure for the cost of a bond issue, but preferred stock may be used as a source of financing alongside debt.

The Cost of Debt Measures the Cost of a Bank