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QUESTION 45 Characteristics of preferred stock that indicate it is a hybrid security most likely include:...

QUESTION 45

  1. Characteristics of preferred stock that indicate it is a hybrid security most likely include:

    Representation of ownership interest.

    Guaranteed dividend payments.

    Premiums attached to its par value.

    Payment of interest.
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Answer #1

The correct answer is option 2

Explanation:- A security is considered as a hybrid security if it has the characteristics of both a stock and a bond. Preferred stock is considered as hyrbrid security because it has features of both stock and bonds. The maturity date for preferred stock is not fixed which is similar to characteristic of a stock. However the dividend payment for a preferred stock has a fixed amount which is similar to bonds. Thus a preferred stock ensures dividend payments that are guaranteed.

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