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. Debt Common stock Characteristic May have a sinking fund provision Usually has no specified maturity date Usually has no voting rights Blue Hamster Manufacturing Inc. has the right to buy back its preferred stock from its preferred stockholders; however, the company will have to pay the preferred stockholders an amount greater than the par value of the preferred stock. Which type of provision does Blue Hamster have in its preferred stock agreement? 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 greater after-tax cost to the issuer, preferred stock or common stock? Why is this the case? Common stock, because it represents a perpetuity, while preferred stock has a specific maturity date Common stock, because its dividends are tax deductible Preferred stock, because preferred stock has priority over common stock in the payment of dividends and the distribution of liquidated assets Preferred stock, because the failure to pay its dividends will not put the issuer into bankruptcy