#1
Which of the following is a characteristic of preferred stock?
Voting rights in the company
Priority in dividend payments
Convertible into common stock
No fixed dividend rate
#2
Which of the following statements is true regarding preferred stock dividends?
Preferred stockholders always receive dividends before common stockholders.
Preferred stockholders receive dividends only if common stockholders agree.
Preferred stockholders receive dividends after common stockholders.
Preferred stockholders receive dividends at the same time as common stockholders.
#3
What distinguishes preferred stock from common stock?
Preferred stockholders have voting rights, while common stockholders do not.
Preferred stockholders have priority in dividend payments and liquidation, while common stockholders do not.
Preferred stockholders receive higher dividends than common stockholders.
Preferred stockholders have the right to convert their shares into common stock.
#4
What is the typical priority of preferred stockholders in case of liquidation?
They have priority over common stockholders but are subordinate to bondholders.
They have priority over both common stockholders and bondholders.
They are subordinate to both common stockholders and bondholders.
They have the same priority as common stockholders.
#5
Which of the following is a typical characteristic of preferred stock?
High voting rights
Priority in dividend payments
Convertible into bonds
Guaranteed capital appreciation
#6
What does it mean when preferred stock is cumulative?
Dividends accumulate if not paid in a given period
Dividends are paid immediately upon declaration
Dividends are paid in installments
Dividends are paid in preferred shares instead of cash
#7
What is a call provision in preferred stock?
Allows the holder to convert preferred shares into common shares
Allows the issuer to repurchase shares at a specified price
Gives the holder priority in dividend payments
Gives the issuer the right to defer dividend payments
#8
What is the advantage of issuing convertible preferred stock?
It allows the issuer to avoid paying dividends.
It provides the issuer with voting rights.
It gives the holder the option to convert into common stock.
It reduces the risk of bankruptcy for the issuer.
#9
In the event of bankruptcy, which class of shareholders has the highest priority in receiving assets?
Common shareholders
Preferred shareholders
Convertible shareholders
Participating shareholders
#10
Which of the following is NOT a typical feature of preferred stock?
Dividend growth
Call provision
Convertible option
Cumulative dividends
#11
What is the purpose of a sinking fund provision in preferred stock?
To enable the company to repurchase shares at market price
To allocate funds for dividend payments
To provide funds for future investments
To distribute dividends to shareholders
#12
What is the difference between participating and non-participating preferred stock?
Participating stock has no voting rights, while non-participating does
Participating stock receives additional dividends if common stock dividends exceed a certain level, while non-participating does not
Participating stock can be converted into common stock, while non-participating cannot
Participating stock has priority in liquidation, while non-participating does not
#13
What is a preferred stock's liquidation preference?
The ability to convert preferred shares into common shares
The priority claim on assets in case of liquidation
The right to receive dividends before common shareholders
The obligation to pay dividends annually
#14
What is the significance of the stated value of preferred stock?
It determines the voting rights of preferred shareholders.
It represents the minimum price at which preferred shares can be sold.
It determines the priority in dividend payments among different classes of preferred stock.
It represents the par value of preferred shares.
#15
What is the main reason why investors might prefer cumulative preferred stock over non-cumulative preferred stock?
Cumulative preferred stock typically offers higher dividend yields.
Cumulative preferred stock guarantees payment of dividends even if they are not declared in the current period.
Cumulative preferred stock is exempt from taxation.
Cumulative preferred stock can be converted into common stock.
#16
Which of the following is NOT a risk associated with investing in preferred stock?
Interest rate risk
Credit risk
Market risk
Liquidity risk
#17
How does preferred stock typically react to changes in interest rates?
Preferred stock prices increase as interest rates rise.
Preferred stock prices decrease as interest rates rise.
Preferred stock prices are not affected by changes in interest rates.
Preferred stock prices are inversely related to changes in interest rates.