Which of the Following Statements Is False

question 14

Multiple Choice

Which of the following statements is false?

• A) The preferred stock issued by young companies typically does not pay regular cash dividends.
• B) The preferred stock issued by young companies usually gives the owner an option to convert it into common stock on some future date, so it is often called callable preferred stock.
• C) If the company runs into financial difficulties, the preferred stockholders have a senior claim on the assets of the firm relative to any common stockholders.
• D) Preferred stock issued by mature companies such as banks usually has a preferential dividend and seniority in any liquidation and sometimes special voting rights.

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Definitions:

Interest-Rate Risk

The potential for investment losses that result from a change in interest rates, affecting the value of fixed-income securities inversely.

Yield To Maturity

The total return anticipated on a bond if the bond is held until its maturation date, accounting for interest payments and the difference between purchase price and par value.

Coupon Bond

A type of bond that pays the holder a fixed interest rate (coupon) over its lifetime, and the principal is repaid at maturity.

Interest-Rate Risk

The potential for investment losses due to fluctuations in interest rates.