If Class a Preferred Shares Provide Only for a Cumulative

question 60

Multiple Choice

If Class A preferred shares provide only for a cumulative dividend of $3 per share, what will be the consequence on liquidation?

• A) Class A Preferred will receive $3 per share more than common shares.
• B) Class A Preferred will receive 103% of common shares.
• C) Class A Preferred will share equally with common shares.
• D) Class A Preferred will be subordinated to the rights of common shares.

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Definitions:

Rate of Return

The percentage gain or loss on an investment over a specified period, expressing the compound annual growth rate.

Initial Margin

The minimum amount of equity required to initiate a position in the securities market, often expressed as a percentage of the total investment.

Sell the Stock

The action of disposing of shares in a company.

Margin Call

A demand by a broker for an investor to deposit additional money or securities to cover possible losses.