Nick and Jamie own stock in Chronoz Industries, a watch manufacturer. In the year 2008, Nick received dividend at the rate of 2 percent, whereas Jamie received dividend at the rate of 0.5 percent. In this scenario, which type of stock did Nick own?

Question

Quizplus · Accepted Answer

Nick's stock is most likely participating preferred stock because it received higher dividends than Jamie's stock. Participating preferred stock typically has a higher dividend rate than common stock and may also entitle the shareholder to additional dividends. Cumulative preferred stock would have accumulated unpaid dividends, and convertible stock can be converted into another type of security (such as common stock). Common stock usually has a lower dividend rate than preferred stock.

Nick and Jamie Own Stock in Chronoz Industries, a Watch