Which of the following is a type of preferred stock that may be exchanged for common stock?

• A. Convertible preferred stock
• B. Callable preferred stock
• C. Cumulative preferred stock
• D. Participating preferred stock

Answer: (A)

Convertible preferred stock carries a conversion feature that lets the holder exchange each preferred share for a predetermined number of common shares, usually at a set conversion ratio and within specified terms. This built-in option to swap into common stock is what makes it exchangeable for the common shares. Other types of preferred stock revolve around different rights: callable preferred stock can be redeemed by the issuer, not converted into common stock; cumulative preferred stock concerns whether missed dividends accumulate; and participating preferred stock may receive extra dividends but doesn’t inherently convert to common stock. So the feature that enables swapping into common stock is the defining trait of convertible preferred stock.