For Preferred Shares to Increase the Return Earned by Common

question 83

Multiple Choice

For preferred shares to increase the return earned by common shareholders,the preferred dividend rate as a percentage of the capital raised must be:

• A) Equal to the rate of return on common and preferred equity combined.
• B) Lower than the rate of return on common and preferred equity combined.
• C) Higher than the rate of return on common and preferred equity combined.
• D) Both equal to and lower than the rate of return on common and preferred equity combined.
• E) None of these answers is correct.

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