Which of the following statements about floating-rate preferred stock is correct?
A) Its dividends increase as interest rates increase.
B) Its market price increases at a set rate annually.
C) It is the only stock issued without a par value.
D) Its dividends are deductible for tax purposes by the paying corporation.

Question

Quizplus · Accepted Answer

Floating-rate preferred stock has a dividend rate that is tied to a benchmark interest rate, such as the prime rate, LIBOR, or Treasury bill rate. As interest rates increase or decrease, the dividend rate on the stock will adjust accordingly. Therefore, option A is the correct statement about floating-rate preferred stock.

Which of the Following Statements About Floating-Rate Preferred Stock Is