SIE Exam Question 114: Answer and Explanation

Question: 114

Which of the following characteristics are true of preferred stocks?

I. Have a prior claim on the income and assets of the issuing firm

II. Have fixed dividends

III. Issued as an alternative to debt

IV. Have an effect on EPS

• A. I and II
• B. I and III
• C. I, II, III
• D. I, II, III, IV

Correct Answer: C

Explanation:

Preferred stocks have a prior claim on the income and assets of the issuing firm, have fixed dividends, and are issued as an alternative to debt, but do not have an effect on EPS.