The term "preferred" comes from the fact that preferred shareholders receive,on average,a higher rate of return than common shareholders even though they have less risk.

Question

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Preferred shareholders typically have a fixed dividend rate, which might be lower than the returns common shareholders can receive through dividends and capital appreciation. The term "preferred" refers to their preferential treatment in dividend payments and asset liquidation, not necessarily a higher rate of return.

The Term "Preferred" Comes from the Fact That Preferred Shareholders