The Price of Preferred Stock May React Strongly to a Change

question 96

Multiple Choice

The price of preferred stock may react strongly to a change in K_p (required rate of return) because

• A) preferred stock may be cumulative.
• B) preferred stock dividends have to be paid before common stock dividends.
• C) there is no maturity date.
• D) corporate recipients of preferred stock dividends may receive a partial tax exemption.

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Definitions:

P-value

A measure in statistical hypothesis testing representing the probability of obtaining test results at least as extreme as the results actually observed, under the assumption that the null hypothesis is true.

Test Statistic

A value calculated from sample data that is used in a hypothesis test to decide whether to reject the null hypothesis.

P-value

The probability of observing test results at least as extreme as the results actually observed, under the assumption that the null hypothesis is correct.

Tenure

The period or duration a person holds a particular status, position, or occupation, often used in the context of employment or property ownership.