Three additional types of securities used to raise long-term capital are preferred stock, warrants, and convertibles. Preferred stock is a hybrid security that represents a cross between debt and common equity. A ___________ is a derivative security issued by firms to facilitate the issuance of some other type of security. It represents a long-term option to buy a stated number of shares of common stock at a specified price. A ____________ security is a bond or preferred stock that can be exchanged at the option of the holder for the common stock of the issuing firm at no additional cost to the holder. All these financing instruments can be used to raise capital efficiently and at a relatively low cost.

The fill-in the blank options are:

1. Convertible / Lease / Warrant

2. Convertible / Lease/ Warrant