Answered: oices A. The required return o

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oices A. The required return o

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 12QTD

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Question

Which of the following statements correctly describe characteristics of preference shares?

Group of answer choices

A. The required return on preference equity is expected to be less than the required return from ordinary equity.

B. None of the other statements are correct

C. A participating preference share participates in the interest payments paid to debtholders.

D. Preference shares are called “hybrid” securities because they display characteristics of both short-term and long-term debt.

Definition Definition Type of stock which is granted priority over dividend distributions as compared to common stockholders. Preferred stocks also do not carry any voting rights. Notably, in a case where a company is going to be liquidated, preferred stockholders have a priority claim on the value of assets of the company as quoted in the balance sheet, as compared to the common stockholders.

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