Final answer:
To decide on investing in preferred stock, a pension manager must consider dividend yield, the credit rating of the company, and the preference of the stockholders. Preferred stocks are assessed for the cash-return, the credit risk, and their rank in case of liquidation. Diversification is vital for risk management.
Step-by-step explanation:
As a pension manager considering investing in preferred stock, you would need to consider several factors before making that investment. The correct answer to your question is 4) All of the above. This includes evaluating the dividend yield to measure the cash flow you're getting back for your investment relative to the market value of the stock. Additionally, the credit rating of the company is crucial as it reflects the corporation's ability to meet its financial commitments and the risk level of the investment. Lastly, the preference of the stockholders must be taken into account, which generally refers to the preferential treatment preferred shareholders receive over common stockholders, particularly with respect to dividends payouts and assets in the event of liquidation.
Stocks can be purchased through various venues, including stock exchanges, over-the-counter markets, and online trading platforms. Diversifying your portfolio is essential to managing risk as it spreads out exposures to different investments, making your overall investment less susceptible to the performance of any single asset. This strategy is an important part of any prudent investment practice.