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.