SIE practice questionmediumPreferred Stock
A potential disadvantage for holders of callable preferred stock is:
- AReceiving less than par value if called
- BForfeiting all accumulated dividends upon call
- CLosing future high fixed dividends if the stock is called when interest rates decline✓ Correct answer
- DBeing forced to convert to common stock
Explanation
Why C — Losing future high fixed dividends if the stock is called when interest rates decline
Callable preferred may be redeemed when rates fall, depriving holders of attractive dividends. Calls must pay at least par or call price and do not force conversion.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Equity Securities questions
- Which of the following statements about common stock is correct?
- Why are preemptive rights valued by shareholders?
- An investor holds 100 shares of $100 par, 6% convertible preferred stock, convertible at $20. If the market price of…
- In a reverse 1-for-4 stock split, an investor holding 400 shares will now hold how many shares?