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1.
Which one is hybrid security?
- A. Preferred stock
- B. Preferred stock
- C. Preferred stock
- D. Preferred stock
Answer: Option A
Explanation:
Yes, preferred stock is a hybrid security because it combines characteristics of both debt and equity. It functions like equity because it represents ownership in a company, but it also behaves like a debt instrument by paying a fixed, predetermined dividend payment, similar to how a bond pays interest.
- Equity-like features: Preferred stock gives the holder ownership in the company, but it typically does not come with voting rights, unlike common stock.
- Debt-like features: It pays a fixed dividend, and failure to pay this dividend does not force the company into bankruptcy, but it must be paid before common stockholders receive dividen
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