The ideal answer is A. Preferred dividends are commonly resolved and are mostly higher than those phelp to common stockholders. Preferred dividends (NOT interest) are, in the majority of instances, passist semi-each year, as compared to common stock dividends that are phelp quarterly.
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Which statement is TRUE as soon as comparing preferred stock to common stock: A. Preferred dividends are phelp before prevalent B. Both preferred and common stock has voting rights. C. Preferred shareholders have actually a junior case to assets upon liquidation after prevalent shareholders D. Preferred interemainder is paid semi-annually
The finest answer is A. Preferred stock has actually choice over common regarding the payment of dividends and also regarding assets upon liquidation. Preferred dividends (NOT interest) are, in most instances, passist semi-annually, as compared to widespread stock dividends that are passist quarterly. Preferred stock lacks voting legal rights.
Dividends on wanted stock might be paid in: A. Cash B. Common shares of the exact same issuer C. Usual shares of another issuer D. Preferred stock of the exact same issuer
The ideal answer is A. Dividends on wanted stock are passist exclusively in cash. Dividends on prevalent stock may be paid in cash; stock; stock of one more company (such as shares of a subsidiary company) or products of that company.
A customer buys 100 shares of preferred at $51 per share. The par value is $50. The dividend rate is 8%. Each dividend payment would be: A. $200 B. $400 C. $600 D. $800
The best answer is A. The yearly rate is 8% x $50 par value = $4 per share x 100 shares = $400. Since desired dividends are passist semi-annually, each payment is for $200.
A customer buys 100 shares of wanted at $101 per share. The par value is $100. The dividend price is 8%. Each dividend payment will be: A. $80 B. $400 C. $800 D. $808
The best answer is B. The annual price is 8% x $100 par value = $8 per share x the number of shares = $800. Since preferred dividends are passist semi-annually, each payment would certainly be $400.
Which statement is TRUE about desired stock? A. When interemainder rates climb, preferred stock prices climb B. Interemainder prices and also desired prices move in the very same direction C. Preferred stock dividends are frequently readjusted for interemainder price swings D. When interemainder prices autumn, preferred stock prices rise
The best answer is D. Preferred stock is a resolved earnings protection that generally has a addressed dividfinish. When industry interemainder prices relocate, the only way for the yield on the security to adjust to the market is to have the price change. When interemainder prices increase, wanted stock prices loss, boosting the yield on the security; and also as soon as interemainder rates fall, preferred stock prices increase, decreasing the yield on the defense. This inverse relationship in between rates and also price also uses to resolved earnings securities.
ABC 8% $100 par desired is trading at $105 in the market. The current yield is: A. 6.6% B. 7.6% C. 8.6% D. 10.6%
XYZ Company type of has issued 10%, $100 par cumulative preferred stock. Two years ago, XYZ omitted its wanted dividfinish. Last year, it phelp a wanted dividfinish of $5 per share. This year, XYZ wishes to pay a widespread dividend. In order to make the circulation to common shareholders, each desired share must be passist a dividfinish of: A. $5 B. $15 C. $20 D. $25
The ideal answer is D. Because the wanted stock is cumulative, to make a dividend circulation to widespread shareholders, the agency requirements to pay all ago, unpassist dividends plus this year"s dividfinish (prior to a widespread dividfinish can be paid). The proclaimed dividfinish price on the desired is 10% based upon $100 par. Two years back the entire dividfinish was omitted, so $10 per share must be passist. Last year, the corporation only passist $5, so tright here is an additional $5 that must be paid. Also, this year"s dividend of $10 need to be paid. The full dividfinish that need to be phelp is $25 per preferred share prior to a prevalent dividfinish have the right to be passist.
What form of wanted stock deserve to move in price as the price of the widespread stock moves? A. Straight preferred B. Cumulative preferred C. Convertible preferred D. Participating preferred
The ideal answer is C. Convertible securities are convertible right into widespread at a predetermined proportion. If the widespread stock price rises over the conversion price, then the convertible protection will certainly profession at the value of the identical number of widespread shares. For instance, assume that $100 par widespread stock is convertible at $20 per share. If the widespread stock price moves to $25, the preferred must profession for $125, bereason it is indistinguishable to 5 common shares.Cumulative wanted implies that if the issuer misses dividfinish payments, these accumulate and should be phelp in full before a widespread dividend can be passist (all preferred is cumulative). Participating desired gets to take part with common in any type of "extra" dividends that are asserted by the firm Board of Directors.
Callable desired stock is most likely to be rereputed by the issuer if: A. interemainder rates rise B. interest rates loss C. the widespread stock price rises D. the prevalent stock price falls
The ideal answer is B. If interemainder prices fall, issuers can "contact in" old high rate preferred and relocation it by marketing brand-new desired at the lower current rates. Thus, calls take location as soon as interemainder rates have fallen.
If interest prices loss, issuers most most likely will call: A. all preferred concerns B. preferred issues through listed below industry interest rates C. preferred concerns with over industry interest prices D. only desired concerns via high speak to premiums
The ideal answer is C. If interest prices fall, issuers a lot of likely will certainly "call in" old high price preferred and also replace it by offering brand-new preferred at the reduced existing rates. The "contact premium" is any amount that the issuer will pay the desired stockholder above par worth as "extra" compensation for calling in the concern. Issuers are even more most likely to call in concerns through low call premiums (lower additional price to the issuer) than speak to in concerns through high speak to premiums (better added price to the issuer).
All of the complying with are types of preferred stock EXCEPT: A. Performance B. Participating C. Cumulative D. Refundable
The best answer is D. Tright here is no such thing as refundable desired stock. Participating desired (also well-known as performance preferred) enables the holder to obtain additional dividend distributions from the issuer if the issuer is having an excellent year. Cumulative wanted "accumulates" any unphelp dividends. Before a widespread dividfinish might be paid, all collected dividends need to be phelp to cumulative wanted shareholders.
All of the adhering to are terms linked with preferred stock EXCEPT: A. renewable B. cumulative C. negotiable D. convertible
The ideal answer is A. Preferred stock is not a renewable security; tbelow is no declared maturity or redemption date. Preferred stock is a negotiable defense, definition that it is traded. Preferred stock have the right to be callable, cumulative, and also convertible.
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Preferred stock has actually all of the adhering to functions EXCEPT: A. Fixed rate of return B. Priority claim to assets upon dissolution compared to common stock C. Priority insurance claim to dividends asserted compared to widespread stock D. Fixed maturity
The finest answer is D. Preferred stock has a addressed price of rerotate (the dividfinish rate), has actually priority case to assets upon dissolution, and has priority insurance claim to dividends if declared by the Board of Directors. Preferred stock does not have a resolved maturity day - it has an indefinite life.