The yield that investors require on callable preferred stock is most likely:
A) less than that of similar dividend-rate non-callable preferred stock.
B) the same as similar dividend rate non-callable preferred stock.
C) greater than that of similar dividend-rate non-callable preferred stock.

Question

Quizplus · Accepted Answer

The yield on callable preferred stock is typically less than that of similar dividend-rate non-callable preferred stock because the issuer has the option to call the stock at a specified price, which gives the issuer the flexibility to refinance the debt at a lower cost if interest rates decline.

The Yield That Investors Require on Callable Preferred Stock Is