Practice Quiz

FINRA Series 7 Exam Prep

Category - Series 7

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Which of the following preferred issues is likely to fluctuate most in value?
  1. cumulative preferred
  2. callable preferred
  3. convertible preferred
  4. broker preferred
Explanation
Answer: C - convertible preferred. Because of the conversion feature, convertibles are more closely linked to the price of the common stock. In addition, since the dividend rate on convertible preferred is usually lower than other preferred issues, the convertibles are more sensitive to interest rate fluctuations.
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