Canadian Securities Course (CSC) Practice Exam

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What do you call preferred shares that can be converted into common stock at the bondholder's option?

  1. Deferred preferred shares

  2. Retractable preferreds

  3. Convertible preferreds

  4. Buy-in

The correct answer is: Convertible preferreds

Preferred shares that can be converted into common stock at the bondholder's option are called convertible preferreds. This means that the holder of these shares has the choice to convert them into common stock at a predetermined price, allowing them to potentially benefit from any increase in the company's stock price. The other options, such as deferred preferred shares, retractable preferreds, and buy-in, do not involve the option to convert to common stock and therefore are not the correct answer.

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