Final answer:
Preferred stock is the type of stock where dividends are limited to a regular fixed rate, providing a set return on investment. Unlike common stock, preferred stockholders generally receive their dividends before common shareholders and typically do not possess voting rights.
Option 'a' is the correct.
Step-by-step explanation:
A stock is a claim on partial ownership in a firm and typically comes in various forms, such as common stock and preferred stock.
The type of stock in which the dividends are capped or limited to a regular fixed rate is known as preferred stock. Unlike common stock, whose dividends may vary and are not guaranteed, preferred stockholders are typically promised a fixed dividend out of the firm's profits.
When investing in the stock market, shareholders can receive returns through dividends or through capital gains by selling their stock for more than they paid. Some companies may opt not to pay dividends, instead reinvesting their profits back into the company for growth, which could potentially lead to higher returns through appreciation of stock value over time.
Preferred shareholders generally have priority over common shareholders when dividends are issued, but they do not have the same voting rights that common shareholders do. This form of stock can be beneficial for investors looking for regular income from their investments, as well as for companies that want to attract risk-averse investors.