Which of the following statements is CORRECT? Corporations cannot buy the preferred stocks of other corporations. A big advantage of preferred stock is that dividends on preferred stocks are tax deductible by the issuing corporation. The preferred stock of a given firm is generally less risky to investors than the same firm's common stock. Preferred stockholders have a priority over bondholders in the event of bankruptcy to the income, but not to the proceeds in a liquidation. Preferred dividends are not generally cumulative.

The preferred stock of a given firm is generally less risky to investors than the same firm's common stock.

Preferred stock gives rights to the stockholder to get a fixed dividend. The payment of the preferred stock is given priority when compared with the payment of the dividend to the shareholder of the common stock. Preferred stocks do not provide the rights of voting like a common stock.

When you prefer a shareholding either preferred or common it will provide partial ownership. This makes both the stocks to be similar. As the payment of dividends to the shareholders of the preferred stocks are regular and given priority over the common stock, the preferred stocks are considered to be less risky than common stock.

The preferred stock of a given firm is generally less risky to investors than the same firm's stock.

Explanation:

Preferred stocks carry less risk than common stock because the Investors earns a fixed rate of dividend. Fixed-income characteristics makes preferred stock a good choice for long-term investments. It is a superior security over equity shares.

It provides preferential rights in regard to payments of dividends and repayment  of capital at the time of liquidation of the company. Hence, such investors who prefer safety of their capital and want to earn income with greater certaininty always prefer to invest in preference shares.

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