SIE Understanding Products and Their Risks Practice Question 37

Correct Answer: C

Explanation:

C: Choice C is correct because convertible preferred stock is often issued, which may be converted to common stock. In this case, the market value of the preferred stock may be similar to that of the common stock, proportionate to the par value of each. Choice A is incorrect because convertible preferred stock typically does not convert to senior bonds as that would diminish its claim on dividends. Choice B is incorrect because convertible senior bonds are not typically issued, and subordinated debentures have a later claim on net assets in the case of liquidation and would not be a desirable conversion. Choice D is incorrect because convertible common stock is not typically issued.