Final answer:
A preferred stock is a form of equity that gives shareholders a claim on partial ownership of a company, with certain privileges over common stockholders. Preferred shareholders get priority in dividend payments but typically do not have voting rights. Preferred stocks provide a fixed dividend, combining features of both stocks and bonds.
Step-by-step explanation:
A preferred stock would be an example of a specific firm's claim on partial ownership. Preferred stocks are a type of equity that grant shareholders certain privileges over common stockholders, such as priority in dividend payments. Unlike common shareholders, preferred shareholders typically do not have voting rights in the company. However, they do receive dividends before common stockholders and have a higher claim on assets in the event of liquidation. Purchasing preferred shares means owning a portion of the company or having equity in the company.
Companies offer preferred stocks as an option for investors seeking diversification in their portfolios because they combine features of both stocks and bonds. For example, the dividend of a preferred stock tends to be fixed, much like the coupon rate on a bond.