Which Is a Characteristic of the Cost of Preferred Stock

question 81

Multiple Choice

Which is a characteristic of the cost of preferred stock?

• A) since preferred stock dividends are fixed, they are tax deductible
• B) because preferred stock has no maturity, the cost analysis is similar to that of debt
• C) preferred stock is valued as a perpetuity
• D) none of the other answers are correct

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Definitions:

Inflation Rate

The progression speed at which the cost of general goods and services increases, diminishing buying power over time.

Consumer Price Index

A metric tracking the average evolution over time in the expenditure of urban consumers on a designated selection of consumer goods and services.

Base Year

A specific year against which economic variables are measured and compared in indices or other economic calculations.

Price Index

A measure that examines the weighted average of prices of a basket of consumer goods and services, changing over time to reflect the cost of living.