Which Statement Regarding Preferred Stock Is True

question 36

Multiple Choice

Which statement regarding preferred stock is true?

• A)A major disadvantage of financing with preferred stock is that preferred stockholders typically have super-normal voting rights.
• B)Preferred stock is normally expected to provide steadier, more reliable income to investors than the same firm's common stock, and as a result, the expected after-tax yield on the preferred is lower than the after-tax expected return on the common.
• C)The preemptive right is a provision in all corporate charters that gives preferred stockholders the right to purchase (on a pro rata basis) new issues of preferred stock.
• D)One of the disadvantages to a corporation of owning preferred stock is that 70% of the dividends received represent taxable income to the corporate recipient, whereas interest income would be tax free.

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Definitions:

Maslow

Refers to Abraham Maslow, a psychologist known for creating Maslow's hierarchy of needs, a theory of psychological health predicated on fulfilling innate human needs in priority, culminating in self-actualization.

Needs

Essential requirements for survival and psychological well-being, including basic physical and emotional needs.

Self-actualizers

Individuals who continually seek personal growth and fulfillment, striving to achieve their highest potential and capabilities.

Prejudice

An opinion formed beforehand without sufficient evidence or personal experience.