2

a.

Preferred stock is similar to a bond in the following way:

I.

preferred stock always contains a maturity date

II.

both investments provide a fixed income

III.

both contain a growth factor similar to common stock

IV.

both of them are creditorship securities

V. None of the options specified here

b.

Cumulative preferred stock:

I.

requires dividends in arrears to be carried over into the next period

II.

has a right to vote cumulatively

III.

has a claim to dividends after common stock

IV.

generally has the right to vote

V. None of the options specified here

c.

Common stockholders have priority over both the preferred stockholders and bond owners in the case of a firm's bankruptcy.

True

False

d.

Which of the following is true about a preferred stock?

a. nNon payment of dividend does not bring bankruptcy

b. Pays a fixed rate of dividend each year c. Dividends can be deducted from firm's income for tax purposes

I.

a and b only

II.

a and c only

III.

b and c only

IV.

a, b, and c only

V. None of the options specified here

e.

Which of the following is true about common stockholders?

I. Common stockholders have a limited liability

II. Common stockholders are residual owners of the company

III. Common Stocks holders are entitled to dividend whenever the firm makes a profit

	I.	I and III only
	II.	II and III only
	III.	I and II only
	IV.	I, II, and III only
	V.	None of the options specified here.