Question

Preferred stock is a hybrid—a cross between a common stock and a bond—in the sense that it pays dividends that normally increase annually (like a stock), but it's payments are contractually guaranteed (like interest on a bond).
a) true
b) false

Answer 1

Answer:

The correct answer is B. False.

Explanation:

Preferred shares are called because they have priority over common shares in the payment of dividends or upon settlement, although they are subordinated to the payment of bonds or obligations. Their conditions are negotiated directly between the issuing entity -bank- and the investor or shareholder. They are a high financial risk asset that can give high bank interest or large losses.