Unit 1: Discussion Questions 2 Please select a question, develop a complete answer, and post it in the thread. You should also respond to a fellow student’s answered question by reinforcing their work or adding additional information or ask for clarification in regards to their answer. Chapter 2: Distinguish among the major assets that trade in money markets and capital markets. What are the differences between alternative bond investments? What is the difference between preferred stock and common stock? Describe how stock market indexes are calculated. How are profits and losses calculated on options and futures contracts.

Chapter Two

Difference between preferred stock and common stock

Even though, these two aspects highlight a piece of ownership in a business, and both acts as tools investors can apply in acquiring profits from the future stability of the industry. However, the primary difference between these two types of stock is that holder of common stock strategically possesses voting advantages, while holders of preferred stock may not. A majority of ordinary stock subjects the owner to one vote per the total number of shares he or she owns, although that is not always the case (Hameed, Kang & Viswanathan, 2010). Some preferred stock offers one vote per share, while others provide more, lesser, or no voting privileges at all. However, preferred stockholders get a fixed dividend from the organization, while common shareholders may or may not get one depending on the type of decision made by the board of directors. Preferred stockholders have a more significant claim to an organization’s assets and earnings. This is evident during the good times when the business has extra cash and decides to circulate money in the form of dividends to its investors.

References

Hameed, A., Kang, W., & Viswanathan, S. (2010). Stock market declines and liquidity. The Journal of Finance, 65(1), 257-293.