Which of the Following Statements About Preferred Stock Is False

question 34

Multiple Choice

Which of the following statements about preferred stock is false?

• A) Preferred stock has a higher-priority claim on the firm's assets than common stock.
• B) Failure to pay dividends will result in default.
• C) Preferred stock has a lower-priority claim on the firm's assets than the firm's creditors in the event of default.
• D) Preferred stock typically pays a fixed dividend.

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Definitions:

T-bill

Short-term government securities issued at a discount from the face value and maturing at par, used to finance government debt.

Issue Date

The specific date on which a financial instrument is issued or becomes effective.

Simple Rate of Interest

Interest calculated only on the principal amount of a loan or deposit, without compounding.

Commercial Paper

An unsecured, short-term debt instrument issued by a corporation, typically used for the financing of payroll, accounts payable, inventories, and meeting other short-term liabilities.