Putable preference shares are less risky than their callable counterparts.
They give the investor the option to put the shares back to the company.
Because of the lower risk they will provide a lower expected rate of return.
Common shares are the most risky, whether or not they are dividend
paying, and are likely to offer the highest expected return.
Equity Investments MCQ - Equity Investments Section 2
Currency appreciation will add additional gain which will make investor’s
total return greater than ETF’s total return.
Amount to be received on liquidation is fixed, equal to par value of the
shares.
Putable preference shares are least risky as they give the investor an
option to sell the shares back to the issuer at a pre-determined price. This
pre-determined price creates a floor for the share’s price that reduces the
uncertainty of future cash flow of investors.
Convertible preference shares tend to exhibit less price volatility than the
underlying common shares because the dividend payments are known and
more stable.
