Series 7 Exam Prep 17, Preferred Stock Features
This podcast is made by Ran Chen, who holds an EA license, Insurance and Securities licenses (Series 6, 63, 65), and the CFP® designation. He is passionate about opening access to high-quality exam preparation resources and helping learners prepare more effectively for professional certification exams.
In this episode you will learn:
- The hybrid nature of preferred stock, combining features of both equity and debt, and its priority over common stock for dividends and in liquidation.
- The critical difference between cumulative preferred, where missed dividends accrue and must be paid, and non-cumulative, where they are forfeited.
- How callable features benefit the issuer by allowing them to redeem shares when rates fall, while convertible features benefit the investor by offering upside potential.
- The characteristics of participating preferred stock, which can earn extra dividends, and adjustable-rate preferred, which has a variable dividend tied to a benchmark, affecting its price stability.
- Key exam traps, including confusing issuer vs. investor benefits and performing dividend calculations without confirming the par value.
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