SIE practice questionmediumPreferred Stock – Convertible
Convertible preferred stock allows the holder to:
- ARedeem shares at par value at any time
- BExchange preferred shares for common shares✓ Correct answer
- CConvert common shares into preferred shares
- DReceive cumulative dividends only during liquidation
Explanation
Why B — Exchange preferred shares for common shares
Convertible preferred can be exchanged for a pre-set number of common shares, which may provide upside potential. Redemption and conversion in the other directions or cumulative dividends on liquidation are not correct.
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