An investor concerned with safety of principal may purchase preferred stock instead of bonds issued by the same company.

Question

Quizplus · Accepted Answer

Preferred stock, while having priority over common stock in terms of dividends and assets in case of liquidation, does not offer the same level of principal protection as bonds. Bonds are debt obligations that typically come with defined terms for interest payments and return of principal, making them generally safer for investors prioritizing principal protection.

An Investor Concerned with Safety of Principal May Purchase Preferred