The Convertible and Preferred Test

1) A _____________________ is a bond that can be converted into a predetermined amount of the company's equity (stock) at certain times during its life, usually at the discretion of the bondholder.”

A) Convertible Preferred
B) Common Bond
C) Convertible Bond
D) None of these

2) ________________ are sometimes called "CVs".

A) Convertibles
B) Cumberland Valley
C) Preferred Stocks
D) None of these

3) Preferred shareholders have priority over common stockholders on earnings and assets in the event of liquidation and they have a fixed dividend (paid before common stockholders).

True or False


4) Preferred shareholders have higher risk than common stockholders when looking at earnings and assets in the event of liquidation.

True or False


5) Preferred Stock is a hybrid between a stock and a bond.

True or False


6) Preferred Stock gives you higher dividends than common stock.

True or False

7) Preferred Stocks are more volatile than common stocks.

True or False

8) ____________ stocks gives higher dividends than _____________ stocks.

9) A ___________ Preferred Stock is a type of preferred stock that carries the provision that the issuer has the right to call in the stock at a certain price and retire it.

10) If the company of this ________________ Preferred Stock gets through the trouble and starts paying out dividends again, it will first have to pay back all of the dividends that are owed to _______________ Preferred share holders.”

Answers;

1) Convertible Bond
2) Convertibles
3) True
4) False
5) True
6) True
7) False
8) Preferred; common
9) Callable
10) Cumulative; Cumulative

If you got 0 or 1 wrong then you know what you are doing with convertible and preferred securities.

If you got 2 wrong then you have knowledge of convertible and preferred securities.

If you got 3 wrong then you have the average investor’s knowledge of convertible and preferred securities.

If you got 4 wrong you better look over convertible and preferred securities blogs again.

If you got 5 or more wrong then you are putting me on!