SIE practice questionmediumPreferred Stock - Callable
Callable preferred stock exposes investors to which specific risk?
- AShareholders gain extra voting rights.
- BThe stock can never pay dividends.
- CInvestors are required to convert to common shares.
- DThe company may redeem shares when interest rates fall.✓ Correct answer
Explanation
Why D — The company may redeem shares when interest rates fall.
Callable shares may be redeemed, often when interest rates drop, limiting investor gains. Dividends, forced conversion, and voting rights are unrelated.
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