Question

Which type of preferred stock permits the owner to exchange it for common stock?

a. callable preferred
b. convertible preferred
c. cumulative preferred
d. protected preferred

Answer 1

Convertible preferred stock allows the owner to convert it into common stock. The answer is option B.

Step-by-step explanation:

The type of preferred stock that permits the owner to exchange it for common stock is convertible preferred stock.

Convertible preferred stock is a type of preferred stock that gives the holder the option to convert their shares into a predetermined number of common shares. This allows the investor to benefit from any potential increase in the value of the common stock.

For example, if an investor holds convertible preferred stock and the market price of common stock rises significantly, the investor can choose to convert their preferred stock into common stock and potentially profit from the increase in value.