Diluted EPS – Mock Exam Question – Why is my answer wrong?

This is my first time posting. Below is a sample mock exam question:

A company has outstanding the entire year 100,000 shares of common stock and 50,000 shares of convertible preferred stock. Each share of preferred stock is convertible into three shares of common stock. It also has 100,000 stock options outstanding the entire year, each of which allows the holder to acquire one share of common stock for $10. During the year, the company paid dividends of $0.50 per share on the common stock and $5.00 per share on the preferred stock. Net income for the year was $450,000 and the income tax rate was 30%. Average market price of the common stock for the year was $25.

Diluted EPS is closest to:

A. $1.00
B. $1.25
C. $1.45

The answer is B, $1.25. The rationale provided is that factoring in the convertible preferred shares EPS ($1.67) is anti-dilutive when compared to the stock options EPS ($1.25). So you use the lower of the two, or so the answer key says. My question is, why don’t you combine both dilutive securities in the final EPS calculations? Both convertible preferred shares and options in this case are dilutive when compared to basic EPS, which is $2.00 per share. I did this to get choice C, $1.45. Thanks for any assistance!