Which term refers to a nonvoting share of ownership in a corporation that pays a fixed dividend?

• A. common stock
• B. preferred stock
• C. debt security
• D. convertible stock

Answer: (B)

The concept being tested is an equity instrument that acts like a fixed-income payment. Preferred stock fits here because it represents ownership in the company but typically does not confer voting rights, and it comes with a fixed dividend, paid before any dividends to common stock. This combination—ownership with a predictable income stream and priority over common stock in dividends and in liquidation—defines preferred stock. By contrast, common stock usually has voting rights and variable dividends, a debt security is a loan with interest payments and no ownership, and convertible stock can be converted into common stock but isn’t defined by a fixed dividend and lack of voting rights.