A company issued 7% preferred stock with a $100 par value.This means that:
A)Preferred shareholders have a guaranteed dividend.
B)The amount of the potential dividend is $7 per year per preferred share.
C)Preferred shareholders are entitled to 7% of the annual income.
D)The market price per share will approximate $100 per share.
E)Only 7% of the total contributed capital can be preferred stock.

Question

Quizplus · Accepted Answer

The stated 7% preferred stock means that shareholders will receive a dividend of $7 per year per preferred share, as a percentage of the par value ($100). This is the fixed dividend that preferred shareholders are entitled to, and is not dependent upon the company's income or profits.

A Company Issued 7% Preferred Stock with a $100 Par