Which One of the Following Statements About Floating-Rate Preferred Stock

question 71

Multiple Choice

Which one of the following statements about floating-rate preferred stock is correct?

• A) Its dividends increase as interest rates increase.
• B) Its market price increases at a set rate annually.
• C) It is the only stock issued without a par value.
• D) Its dividends are deductible for tax purposes by the paying corporation.

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Definitions:

Borrow

To receive something of value with the promise to return it or its equivalent value at a future date.

Unlevered Cost

The cost of funding a project without any debt, reflective of the project's risk as if financed entirely by equity.

Annual Coupon

The yearly interest payment made to bondholders, typically expressed as a percentage of the bond's face value.

Tax Rate

The slice of income or profits that is claimed by the government from corporations or people in the form of taxes.