Question

True/False

1. Common stocks and preferred stocks are the same except preferred stocks do not have voting rights.

2. Risk is defined as the possibility that you will lose money when buying an investment.

Answer 1

Answer 1 - False

Reason - preferred stock and common stock are different in several ways. The main difference being that the preferred stock holders don't have voting rights in companies decision (except in preference holders meeting). But apart from this also there are a number of differences In both the stocks.

The preferred stock holders have a priority over a company's income and they are paid a dividend every year before equity holders. Moreover the preferred stock holders receive dividend irrespective of profit or loss of income, but dividends are paid to equity holders after settling all outside obligations, payment of interest and dividend, that too only if any profit remains.

Answer 2 - True

Reason - Risk is a possibility that you will lose money when buying an investment. Risk is involved in every Investment, it can be negligible like while buying Treasury bonds or it can be very high like trading in stocks.

Risk is inherent in every Investment and it means one can loose some or all of his money as per the level of risk involved in the investment.