Canadian Securities Course (CSC) Level 1 Practice Exam

Question: 1 / 400

What are convertible preferred shares?

Accrue dividends at a fixed rate.

Cannot be converted into other types of shares.

Enable the holder to convert them into a different class of shares at a predetermined price and date.

Convertible preferred shares are a type of preferred shares that give the shareholder the option to convert them into a different class of shares, usually common shares, at a predetermined price and date. This feature provides the shareholder with the flexibility to benefit from potential appreciation in the value of the underlying common shares. It is important to note that convertible preferred shares are not fixed in terms of dividends, as they can convert into a different class of shares based on the terms and conditions set forth by the issuing company.

Options A, B, and D are incorrect because convertible preferred shares do not necessarily accrue dividends at a fixed rate, cannot be converted into other types of shares, and do not need to be reissued if the company becomes insolvent.

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Must be reissued if the company becomes insolvent.

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