Asked by Julian Cintron on May 26, 2024
Verified
Preferred stock is like long-term debt in that ________.
A) it gives the holder voting power regarding the firm's management
B) it promises to pay to its holder a fixed stream of income each year
C) the preferred dividend is a tax-deductible expense for the firm
D) in the event of bankruptcy preferred stock has equal status with debt
Long-Term Debt
Financial obligations of a borrowing entity that are due for repayment in more than one year's time.
Fixed Stream of Income
Income generated from investments that provide a constant amount of money at regular intervals.
- Recognize and differentiate among various market instruments such as bonds, equities, and derivatives.
Verified Answer
TK
tegan keeversMay 29, 2024
Final Answer :
B
Explanation :
Preferred stock is sometimes referred to as a hybrid security because it has characteristics of both equity and debt. One key similarity between preferred stock and long-term debt is that both promise to pay their holders a fixed stream of income each year. This fixed payout is known as a dividend for preferred stock and interest for long-term debt.
Learning Objectives
- Recognize and differentiate among various market instruments such as bonds, equities, and derivatives.
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