FINRA Series 7 Exam Prep

Category - Series 7

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Convertible preferred stock has all of the following characteristics except:

a lower dividend rate than non-convertible preferred
a dilution of earnings if converted into common stock
a requirement for shareholders to always accept the call price when called
required dividend payments to shareholders before any dividends are paid to holders of common stock

Explanation

Answer: C - a requirement for shareholders to always accept the call price when called. All of the other statements are true “except” this one. Convertible preferred shareholders have an opportunity to convert to common stock. There is no forced call price.

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