Preferred stock is considered a hybrid security because it blends the characteristics of both debt and equity.

Question

Quizplus · Accepted Answer

Preferred stock has features of both debt and equity. It provides a fixed income like debt, but it also has the potential for capital appreciation like equity. Additionally, preferred stockholders have a higher claim on assets than common stockholders, similar to creditors in a debt arrangement.

Preferred Stock Is Considered a Hybrid Security Because It Blends