Question

26. Which of the following types of “risk” are encountered in financial markets?

    1. Interest rate risk: Higher interest rate risks impair the value of fixed income securities (such as bonds).

    2. Credit risk: Risk of possible default, where the borrower cannot make timely interest payments and/or principal repayments.

    3. Inflation risk: Purchasing power is impeded by a general increase in the price of goods and services.

    4. Reinvestment risk: Inability to reinvest coupons that have been paid to you at a similar investment yield as your original investment.

          e. All of the above.
    

6. Prologis -- a major industrial real estate company -- issued preferred stock in order to raise additional capital. All of the following are investment attributes (characteristics) of preferred stock except:

a. They have no voting rights, except in some instances where dividend payments haven’t been made.

2. Preferred stock is technically classified as a debt security.

3. Dividend payments on preferred stock must be made prior to

dividends on common stock.
d. In a liquidation of a company, preferred stock receives preference over common stock.
e. Only (a) and (b)

Answer 1

1.
e. All of the above.

2.
e. Only (a) and (b)

A is wrong because they do not get any voting rights
B is wrong because they are classified as equity security