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

question 30

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 the above.
• E)None of the above.

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Definitions:

Imports

Goods or services brought into one country from another for the purpose of sale.

Comparative Advantage

A principle that states a country should produce goods and services at a lower opportunity cost than its trade partners.

Monetary Cost

The total amount of money that is spent in order to purchase goods or services.

Resources

Inputs or assets used in the production of goods and services, including labor, capital, and natural materials.