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When Preferred Stock Has a Dividend Preference, It Is Usually

question 18

True/False

When preferred stock has a dividend preference, it is usually stated as a dollar amount per share or as a percentage of par value.


Definitions:

Interest Rate Risk

The potential for investment losses due to fluctuations in interest rates.

Zero Coupon Treasury Bond

A government bond that does not pay interest throughout its life and is sold at a discount from the face value.

Reinvestment Rate Risk

The risk that the returns from reinvesting cash flows will be lower than expected due to changes in interest rate.

Market Interest Rate

The prevailing rate of interest available in the marketplace for securities of similar risk and maturity.

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