Equity Investments Q161

0. Which of the following types of securities of a same company would most likely offer the lowest expected return to the investor?

  • Option : B
  • Explanation : 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.
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