For Preferred Shares to Increase the Return Earned by Common

question 41

Multiple Choice

For preferred shares to increase the return earned by common shareholders, the preferred dividend rate as a percentage of the capital raised must be:

• A) Lower than the rate of return on common and preferred equity combined.
• B) Both equal to and lower than the rate of return on common and preferred equity combined.
• C) Equal to the rate of return on common and preferred equity combined.
• D) Higher than the rate of return on common and preferred equity combined.
• E) None of these answers is correct.

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Definitions:

Collectivism

Collectivism is an ideology that emphasizes the priority of group goals over individual goals and the importance of cohesion within social groups.

Group Goals

Objectives or outcomes that a group collectively seeks to achieve or accomplish.

Individualism

A social theory valuing the independence and self-reliance of the individual often over the group or collective society.

Actor-Observer Bias

A cognitive bias that explains the tendency to attribute one's own actions to external factors while attributing other people's behaviors to their internal characteristics.