If the tradeoff theory states that in the real world there is a tradeoff between the benefits of lower costs offered by the tax-deductibility of interest on debt and the increase in the risk of bankruptcy that a firm experiences as it uses greater amounts of debt.

Then according to the trade-off theory that has been suggested as a possible explanation for the differences in firms' capital structures that we observe in the real world, which of the following securities is the least expensive form of financing for a particular firm?

Corporate debt

Preferred stock

Common stock

Classified stock

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