SIE Question Preffered stock

Hi ! So I am struggling with these types of questions KHVG3-6382J? Could anyone help… I am struggling with preffered stock in general… Thank you !

1 Like

Hey Erika, the best thing to do for this kind of question is to go through the points one by one.…

A similar issue without the participating feature would likely have a higher yield

True. The participating feature is beneficial to the investor. In order to make a similar issue without it be as valuable, it would have a higher yield.

The yield indicates a market price below par

False. Yields and market prices have an inverse relationship. The yield here is lower than the dividend rate, which means the security would be trading at premium, i.e. a market price above par.

These shares pay a fixed $10.00 per share in annual dividends, but are eligible for a higher dividend rate.

True. This is the definition of participating preferred stock.

If any of these points don’t make sense, let us know and we can explain further!