Question : Preference shares are referred to as such if the holder has the opportunity, within the terms of the issuance, to convert their prefrence shares into equity shares are called-
Option 1: Cumulative Preference share
Option 2: Convertible Preference share
Option 3: Non Convertible Preference share
Option 4: Non Cumulative Preference share
Correct Answer: Convertible Preference share
Solution : A preference share issued with the provision that it may be converted into a specified number of common shares or cash at a specific moment or when a specific occurrence occurs is called a Convertible preference share. A company can issue convertible preference shares which may be converted into equity shares of the company or at the option of shareholders may be redeemed the maturity.
Hence the correct answer is option 2.
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