Which type of stock can be exchanged for common stock at a constant ratio?

Convertible preferred stock is a type of preferred stock that gives shareholders the option to convert their shares into a specified number of common shares, usually at a predetermined ratio. This feature offers flexibility and potential upside to investors, allowing them to benefit from the appreciation of common stock.

When a preferred stock is convertible, it typically includes a conversion ratio, which is the rate at which preferred shares can be exchanged for common shares. This ratio remains constant, making it straightforward for investors to understand their conversion rights and the potential value they can access if the common stock performs well.

This differs from other types of stock; for example, treasury stock refers to shares that have been repurchased by the issuing company and are not eligible for dividends or voting. Callable preferred stock gives the company the right to repurchase the shares at a predetermined price before the maturity date but does not involve conversion into common stock. Participating preferred stock allows shareholders to receive additional dividends beyond the fixed rate if the company performs well, but it does not grant conversion rights to common stock.

Thus, the defining characteristic of convertible preferred stock is its ability to be exchanged for common stock at a fixed, constant ratio, making it the correct answer.