Preferred shares that give the shareholders the option of exchanging their preferred shares for common shares at a specified rate are known as
A)Participating preferred shares
B)Callable preferred shares
C)Cumulative preferred shares
D)Convertible preferred shares
E)Noncumulative preferred shares

Question

Quizplus · Accepted Answer

Convertible preferred shares give the shareholders the option to convert their preferred shares into common shares at a specified rate. Participating preferred shares provide additional dividends to shareholders beyond the stated dividend rate in the event of company profitability. Callable preferred shares can be redeemed by the issuer at a specified date or price. Cumulative preferred shares accumulate unpaid dividends that must be paid before common shareholders receive any dividends. Non-cumulative preferred shares do not accumulate unpaid dividends. However, none of these options include the option of exchanging preferred shares for common shares, which is only available with convertible preferred shares.

Preferred Shares That Give the Shareholders the Option of Exchanging