When inflation rises, preferred stock prices fall.

Name: When inflation rises, preferred stock prices fall.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Inflation leads to higher interest rates, which increases the cost of borrowing for companies. This makes preferred stocks less attractive to investors since the fixed dividend payment becomes less valuable in comparison to higher interest rates offered elsewhere. As demand for preferred stocks decreases, the prices fall.

When Inflation Rises, Preferred Stock Prices Fall