Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Should preferred stock be considered as equity or debt? Explain.
Expert Solution
Step 1
Preferred stock:
Preferred stock is a hybrid security that mixes characteristics of both common stocks and bonds. Preferred stock denotes to a class of proprietorship that has an advanced claim on assets and earnings than common stock has. Preferred stock also known as preference shares, or preferred shares is a kind of stock which might have any combination of characteristics not owned by common stock comprising properties of both debt and equity, and is usually considered a hybrid security.
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