Callable preferred stock is defined as?

Callable preferred stock refers to the type of preferred stock that a corporation has the option to redeem or repurchase at a predetermined price after a specified date. This characteristic gives the company flexibility in managing its capital structure, as it can choose to buy back the shares when conditions are favorable, such as declining interest rates or when it wishes to restructure its equity.

The specified value at which the stock can be redeemed is typically set at the time of issuance and is known as the call price. If market conditions improve or interest rates fall, the issuer may opt to call the preferred shares to reissue new shares at a lower dividend yield. This feature attracts investors seeking the potential for stable income while acknowledging the risk of being called away during favorable market conditions.

The other options do not accurately describe callable preferred stock. The inability to sell stocks, the conversion into common stock, or holding stocks indefinitely does not apply to the definition of callable preferred stock, which specifically focuses on the issuer's right to redeem the shares at specific terms.