Which of the following is a characteristic of preferred stock? A. Give voting rights to its owner. B. It is like annuity. C. Investors cannot force the payment of the dividend. D. Dividends are tax-deductible for the firm as opposed to interest payment.
Which of the following is a characteristic of preferred stock? A. Give voting rights to its owner. B. It is like annuity. C. Investors cannot force the payment of the dividend. D. Dividends are tax-deductible for the firm as opposed to interest payment.
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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2. Which of the following is a characteristic of preferred stock?
A. Give voting rights to its owner.
B. It is like annuity.
C. Investors cannot force the payment of the dividend.
D. Dividends are tax-deductible for the firm as opposed to interest payment.
Expert Solution
Step 1: Analysis of Question
This is a statement that is accurate. One way in which preferred stock is comparable to an annuity is that it ensures that its owners receive a consistent stream of dividend payments each year. Dividends are distributed at predetermined intervals, just as an annuity pays on a consistent basis. Because of this feature, preferred stock attracts individuals who are looking for a consistent stream of income.
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