Which of the Following Statements Is Correct

question 89

Multiple Choice

Which of the following statements is correct?

• A) A floating rate bond has an advantage over a fixed rate bond because its price is more stable and this makes a floating rate preferred bond more suitable as a liquid asset.
• B) Convertible preferred stock would likely appeal more to income-oriented investors because they can convert their capital gains into bond income simply by converting their preferred stock into bonds.
• C) One advantage of preferred stock from an issuer's perspective is that it has a lower after-tax cost than that of debt.
• D) One principal advantage of preferred stock is that preferred stockholders have a legal enforceable right to their stock dividend,thus,preferred stock is generally less risky than unsecured debt.
• E) Because of the 70% dividend exclusion rule for preferred stock dividends,the higher a company's tax bracket,the more likely it is to issue preferred stock.

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