Which of the Following Is Not True Regarding Preferred Stock

question 2

Multiple Choice

Which of the following is not true regarding preferred stock?

• A) Preferred stockholders have rights to the assets of the corporation before common stockholders.
• B) Preferred stockholders have priority over common stockholders in receiving dividends.
• C) Preferred stock has greater potential for capital appreciation than common stock.
• D) The price of preferred stock is less volatile than the price of common stock.

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Definitions:

Effective Interest Rate

The real rate of interest earned or paid on a loan or investment over a period, taking into account the effect of compounding.

Interest Expense

The cost incurred by an entity for borrowed funds, considered a non-operating expense on the income statement.

Contract Rate

The specific interest rate established in a lending or financial agreement, often determining the amount of interest a borrower will pay over the term of a contract.

Present Value

Today's monetary value of a forthcoming sum or series of cash flows, after considering a specified rate of return.