CFP® Practice Question: Differences Between Preferred Stock and Long-Term Bonds

Which of the following statements correctly describe differences between preferred stock and long-term bonds?

(1)   Preferred stock is more risky for the investor than long-term bonds issued by the same company.

(2)   The market price of preferred stock fluctuates more than the market price of long-term bonds.

(3)   Long-term bonds usually have a longer maturity than preferred stock.

(4)   Preferred stock pays a fluctuating dividend, while long-term bonds pay a fixed rate of interest.

1. (1) and (2) only
2. (3) and (4) only
3. (1), (2), and (4) only
4. (2), (3), and (4) only