Which instrument is designed to provide fixed dividends and a higher claim on assets than common stock?

Which instrument is designed to provide fixed dividends and a higher claim on assets than common stock?

• A. Senior Secured Debt
• B. High Yield Bonds
• C. Preferred Stock
• D. Mezzanine

Answer: (C)

Fixed dividends and a higher claim on assets than common stock describe preferred stock. It is an equity instrument that pays a set dividend rate, typically scheduled and priority over common shareholders for distributions. In liquidation, preferred shareholders are paid before common stockholders, though debt holders still have the primary claim. Debt instruments like senior secured debt or high yield bonds pay interest rather than dividends and generally sit higher in the liquidation stack than equity. Mezzanine financing is a hybrid with debt-like features and typically does not offer fixed dividends.

Fixed dividends and a higher claim on assets than common stock describe preferred stock. It is an equity instrument that pays a set dividend rate, typically scheduled and priority over common shareholders for distributions. In liquidation, preferred shareholders are paid before common stockholders, though debt holders still have the primary claim.

Debt instruments like senior secured debt or high yield bonds pay interest rather than dividends and generally sit higher in the liquidation stack than equity. Mezzanine financing is a hybrid with debt-like features and typically does not offer fixed dividends.