Question

If you had the choice to purchase common stock or preferred stock for Amazon which would you choose? Why? Which is riskier? Which is the better deal?

Answer 1

Thank you for asking such an interesting question. The solution is as follows:

If I have the choice to purchase common stock or preferred stock for Amazon, I would choose common stock since I am a risk taker. Risk-taking helps me to get a better return.I would get an ownership of Amazon and voting rights too.There is no doubt in the fact that Common stocks are riskier than preferred stocks since Preferred Stocks get predecided returns and in case of liquidation too, preferred stocks are given priority over common stocks.

Now, which is the better deal?

That depends upon the risk-taking nature of investor. If the person avoids risk and wants a constant return, Preferred Stock is the better deal. But, if the investor is a risk taker(just like my scenario), the Common stock is the better deal.