Why are preferred stocks often referred to as "hybrid" securities?
A) They are similar to money market as well as capital market securities.
B) Owners have the same voting rights as bondholders in the annual stockholders meeting.
C) They make fixed payments such as bonds but are not legal obligations of the issuer.
D) Like fixed income securities, they have a maturity date.

Question

Quizplus · Accepted Answer

Preferred stocks are often referred to as "hybrid" securities because they have characteristics of both equity and debt instruments. Like common stocks, preferred stocks represent ownership in the company, but like bonds, they typically make fixed payments in the form of dividends. However, unlike bonds, preferred stocks are not legal obligations of the issuer and do not have a maturity date.

Why Are Preferred Stocks Often Referred to as "Hybrid" Securities