Nearly All Preferred Stock Comes with the Right to Receive

question 160

Multiple Choice

Nearly all preferred stock comes with the right to receive all past unpaid dividends before common shareholders can receive any dividends. This right is referred to as:

• A)the preference feature.
• B)the liquidation preference.
• C)the cumulative feature.
• D)voting preference.

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Definitions:

Theoretical Value

The estimated price of an asset or financial instrument based on mathematical models instead of market prices, often used in options pricing.

Binomial Option Price

A mathematical model that is used to calculate the theoretical price of options using a binomial tree of possible price movements.

Black Scholes Price

A theoretical price model for European-style options that estimates the option's price given certain fixed financial variables.

Subintervals

Divisions of a larger interval into smaller ones, often used in mathematical analysis and computations.