Which of the following statements concerning preferred stock is most correct? 7)

Question

Which of the following statements concerning preferred stock is most correct? 7) A) If a corporation issues 4% preferred stock with a par value of $100, the dividend will increase by 4% per year. B) Preferred stock dividends are typically the same each year, allowing a preferred stock to be valued as a perpetuity. C) Preferred stock is valued the same as zero coupon bonds because the cash flow patterns are similar. D) Preferred stock dividends are calculated as a percentage of common stock dividends, although the preferred stock dividends must be paid first.

Explanation / Answer

The correct answer is Preferred Stock dividends are typically the same each year, allowing a preferred stock to be valued as a perpetuity.

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