In Accordance with the Rules That Apply to Corporate Formation

question 6

Multiple Choice

In accordance with the rules that apply to corporate formation, which one of the following features does not make an issue of preferred stock "nonqualified"?

• A)The shareholder can require the corporation to redeem the stock.
• B)The dividend rate on the stock may not vary with interest rates, commodity prices, or other similar indices.
• C)The corporation is either required to redeem the stock or is likely to exercise a right to redeem the stock.
• D)The stock is limited and preferred as to dividends.

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Definitions:

Compounded

The process where interest is calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan.

Annually

Annually means occurring once every year or pertaining to a period of one year.

Compounded

The process of earning interest on previously earned interest, leading to an increase in the total amount over time.

Monthly

Occurring or produced once a month.