Preferred stock is often called a hybrid security because it has some characteristics that are typical of debt and others that are typical of common equity. The following table lists several characteristics of preferred stock. Determine which of these characteristics are consistent with debt securities and which are consistent with common stock. Blanche Inc. is required to repurchase and retire 5% of its preferred stock each year. Which type of provision does Blanche Inc. have in its preferred stock agreements? A call provision A participating provision A sinking fund provision For the same issuing firm and on the same day of issuance, which security tends to have a lower after-tax cost to the issuer, debt or preferred stock? Why is this the case? Preferred stock, because its has priority over debt in the payment of dividends and the distribution of liquidated assets Preferred stock, because preferred stock issues are not allowed to have sinking fund provisions Debt, because its interest payments are tax deductible Debt, because its interest payments are not tax deductible