Many preferred stocks have a feature that requires a firm to periodically set aside an amount of money for the retirement of its preferred stock.What is the name of this feature?

Question

Quizplus · Accepted Answer

The feature described is the sinking fund, where the firm sets aside money periodically to retire its preferred stock. Convertible refers to the option for preferred stockholders to convert their shares into common stock. Callable refers to the company's option to redeem the preferred stock before maturity. Cumulative means that any missed dividend payments accumulate and must be paid before common shareholders receive dividends.

Many Preferred Stocks Have a Feature That Requires a Firm