Whenever the Dividend Rate on Preferred Shares Is Higher Than

question 22

True/False

Whenever the dividend rate on preferred shares is higher than the rate the corporation earns on its assets,the effect of issuing preferred shares is to increase the dividend rate earned by common shareholders.

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Definitions:

Annually

Pertaining to an event or activity that occurs once every year.

New Home Prices

The selling prices of newly constructed homes currently on the market.

Cost

The amount of money required to purchase goods or services or the value consumed in the production of goods or services.

Discount Rate

The rate of interest applied to loans provided to commercial banks and other financial institutions by the Federal Reserve through its discount window.