Stockholders Prefer to Invest in Preferred Stock Because

question 131

Multiple Choice

Stockholders prefer to invest in preferred stock because

• A) preferred stock confers preferred voting rights.
• B) preferred stock can always be converted to common stock if they desire.
• C) the dividends are generally increased each year.
• D) the dividends are paid on preferred stock before they are paid on common stock.

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Definitions:

Investment Income

Earnings from assets purchased, such as dividends from stocks, interest on loans or bonds, or rental income from property.

Amortized Cost Model

An accounting technique used to gradually write down the cost of an intangible asset over its useful life.

Fair Value

The price that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.