Which Statement About Preferred Stock Is Incorrect

question 30

Multiple Choice

Which statement about preferred stock is incorrect?

• A)Callable preferred stock gives the issuing company the right to purchase the preferred stock back from the shareholder.
• B)The call price on callable preferred stock is set below the par or issue price of the stock to compensate for the call feature.
• C)Convertible preferred stock gives the owners of the stock the right to exchange their preferred stock for common stock.
• D)Convertible preferred stock can be expected to have a lower dividend percentage than a similar nonconvertible preferred stock.
• E)Participating preferred stock can receive a larger dividend than the prespecified dividend when a company has an especially good year.

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Definitions:

Mental Defect

An outdated and offensive term that was previously used to describe a range of intellectual disabilities or cognitive impairments.

American Law Institute (ALI)

An independent organization in the United States that produces scholarly work to clarify, modernize, and otherwise improve the law.

M'Naghten

Refers to the M'Naghten Rule, a legal standard for determining the insanity of a defendant, based on their ability to understand right from wrong at the time of the crime.