Which of the Following Statements Pertaining to Preferred Stock Is

question 95

Multiple Choice

Which of the following statements pertaining to preferred stock is not correct?

• A)Preferred stock may have an adjustable rate which pays a dividend that is adjusted,usually on a quarterly basis.
• B)Preferred stock dividends are contractual obligations that must be paid in profitable years.
• C)Most preferred stock issues are nonparticipating,meaning that the shareholders are entitled to receive only dividends based on the stated dividend rate.
• D)Preferred shareholders are given preference with respect to both dividend distributions and in liquidation of the company.

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Definitions:

Par Value

The face value of a bond or stock as stated by the issuing company, which does not necessarily match the market value.

Annual Coupon

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

Market Interest Rate

The prevailing rate of interest determined by supply and demand in the market, influencing how much borrowers pay for loans and investors earn on deposits.

Annual Coupon

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