When the owner of preferred stock has the option to exchange preferred stock for a fixed number of shares of common stock, the stock is called ____ preferred stock.
A) convertible
B) callable
C) redeemable
D) cost-based
E) natural

Question

Quizplus · Accepted Answer

Convertible preferred stock allows the holder to convert their shares into a fixed number of common shares at a predetermined price, giving them potential upside if the common stock price increases. Callable and redeemable stock relate to the company's ability to call back or redeem the stock before maturity. Cost-based and natural stock are not recognized terms in finance.

When the Owner of Preferred Stock Has the Option to Exchange