Preferred Stock Is Sometimes Regarded Like a Debt Security Because

question 62

Multiple Choice

Preferred stock is sometimes regarded like a debt security because

• A) legally preferred stock is a debt security.
• B) preferred dividend payments like bond interest payments are fixed amounts regardless of the firm's earnings.
• C) preferred dividends are deductable from taxable income just like interest payments on bonds.
• D) preferred stock holders receive a residual value and not a stated value.

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Definitions:

Filter Theory

A theory in psychology proposing that information is screened or filtered before further processing for attention or action.

Physical/Acoustical Properties

relate to the characteristics of sound or sound waves, including frequency, amplitude, and velocity, which determine how sounds are produced, transmitted, and perceived.

Attention Hypothesis

is the theory suggesting that the focus and allocation of cognitive resources towards certain stimuli or tasks influence perception and information processing.

Automatization

the process through which tasks become automatic after extensive practice, requiring less cognitive effort.