Which of the Following Is FALSE Regarding Equity Capital

question 73

Multiple Choice

Which of the following is FALSE regarding equity capital?

• A) Common stock holders bear most of the firm's business and financial risk.
• B) Preferred stock holders receive a fixed annual payment on their invested capital.
• C) Common stock holders have ownership in the firm by voting for the firm's management.
• D) Preferred stockholders can force the firm into bankruptcy if dividend payments are not paid.

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Definitions:

Deferred Call Provision

A clause in a bond contract that prohibits the issuer from repurchasing the bond until a specified date has passed.

Callable Bond

A type of bond that can be redeemed by the issuer before its maturity date at a specified price.

Redemption

The process by which securities or financial instruments are converted into cash or its equivalent value.

Collar

A protective options strategy that involves buying a put option and selling a call option on the same asset to limit the range of possible returns.