What Is an Advantage to a Business When Financing Through

Multiple Choice

What is an advantage to a business when financing through an issue of preferred shares rather than bonds?

A) Preferred shares trade on stock exchanges as well as OTC (over the counter) making preferred share issues always easier to place.
B) A company is legally obligated to pay interest to its bondholders. Dividends to preferred shareholders can be deferred indefinitely.
C) Preferred shareholders demand a lower rate of return than bondholders.
D) Dividends paid to preferred shareholders can be written off against taxes at a higher rate than interest payments to bond holders.
E) Preferred shareholders demand a lower value of assets to be pledged against the capital they provide to the business than bondholders do.