Even Though the Dividend Rate on an Adjustable-Rate Preferred Stock

question 8

Multiple Choice

Even though the dividend rate on an Adjustable-Rate Preferred Stock (ARPS) is floating to keep in line with interest rates,the instrument still suffers from risk such as:

• A) a thin market causing potential principal risk and liquidity concerns.
• B) the risk of downgrades from the narrow range of issuers.
• C) the impact of tax law changes, which may reduce the after-tax value of the instrument.
• D) All of these.
• E) None of these.

---

Definitions:

Clean Water Act

U.S. federal law that regulates the discharge of pollutants into the nation's surface waters, including lakes, rivers, streams, and coastal areas.

Wetlands

Areas where water covers the soil, or is present either at or near the surface of the soil all year or for varying periods of time during the year, including swamps, marshes, and bogs.

Community Right-to-Know Act

U.S. federal law that requires industries to report storage, use, and releases of hazardous substances to inform community safety and health.

Chemical Hazards

Pertains to any chemical substance that can cause harm to individuals or the environment when improperly managed, stored, or used.