Asked by Alvin P. Davis on Jul 25, 2024
Verified
Shareholders of convertible preferred stock generally have the:
A) Right to convert their shares into bonds with an equivalent yield-to-maturity.
B) Obligation to convert their shares into callable shares of common stock.
C) Obligation to convert their shares into shares of common stock.
D) Right to convert their shares into cash at par value at their discretion.
E) Right to convert their shares into shares of common stock.
Convertible Preferred Stock
A type of preferred stock that holders can convert into a specified number of shares of common stock, usually after a predetermined date.
Yield-to-Maturity
The total return anticipated on a bond if the bond is held until the end of its lifetime, considering all payments and assuming a reinvestment of coupons.
- Comprehend the characteristics and rights associated with different types of stocks, including common and preferred stocks.
Verified Answer
RC
Ranjabati ChakrabortiJul 28, 2024
Final Answer :
E
Explanation :
Convertible preferred stock gives shareholders the right, but not the obligation, to convert their shares into a predetermined number of shares of common stock, usually at any time at the shareholder's discretion. This feature provides potential for upside participation in the company's equity while also offering the fixed income-like benefits of preferred shares.
Learning Objectives
- Comprehend the characteristics and rights associated with different types of stocks, including common and preferred stocks.