Which of the Following Statements Is Most CORRECT

question 15

Multiple Choice

Which of the following statements is most CORRECT?

• A) by law in most states, all preferred stock must be cumulative, meaning that the compounded total of all unpaid preferred dividends must be paid before any dividends can be paid on the firm's common stock.
• B) from the issuer's point of view, preferred stock is less risky than bonds.
• C) whereas common stock has an indefinite life, preferred stocks always have a specific maturity date, generally 25 years or less.
• D) unlike bonds, preferred stock cannot have a convertible feature.
• E) preferred stock generally has a higher component cost of capital to the firm than does common stock.

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Definitions:

Value Judgments

Assessments based on personal views, ethics, or standards rather than objective measures, often influencing decision-making processes.

Policy Issues

Topics or problems that require governmental or organizational decision-making and action for resolution.

Normative Economic Statement

Statements that reflect opinions, beliefs, or values about what the economy should be like, rather than what it actually is.

Inflation Rate

The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.