Question

(I) A share of common stock in a firm represents an ownership interest in that firm.(II) A share of preferred stock is as much like a bond as it is like common stock.A) (I) is true, (II) false.B) (I) is false, (II) true.C) Both are true.D) Both are false.

Answer 1

C) Both are true.

Step-by-step explanation:

A common stock is a type of security that represents an ownership interest in a firm. Holders of a common stock are paid a percentage of the firm's profit as dividends at particular periods.

Holders of common stock have voting right in the company where the stock is bought.

A preferred stock is a security that pays holders a fixed amount of dividend at a particular period.

It has both the features of a common stock and bond because just like common stock, it can appreciate in price and like bonds, a fixed amount of dividends is paid.

Holders of a preferred stock are paid dividends before common stock shareholders.

Holders of a preferred stock do not have voting rights in the company where the stock is bought.