CFA Practice Question

There are 191 practice questions for this study session.

CFA Practice Question

Which feature of preferred shares appeals to investors who want to participate in the stock market without feeling as though they are taking wild risks?

A. Cumulative
B. Participating
C. Convertible
Correct Answer: C

Convertible preferred shares trade like common shares when the price of common shares moves above the conversion price. If the stock price slips below the conversion price, the convertible preferred shares trade just like bonds, effectively putting a price floor under the investment.

User Contributed Comments 3

User Comment
johntan1979 Participating is extra dividends if the company hit some financial targets.
CFAToad Trick question. Good catch John.
khalifa92 ahhh
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