Will the market value of a perpetual preferred share (paying a fixed periodic dividend) rise or fall if the rate of return (dividend yield) required by investors declines? Give a brief explanation.

Question

Quizplus · Accepted Answer

The Answer is Yes, the market value will rise. The rate of return (dividend yield) is the (fixed) annual dividend calculated as a percentage of the market value. If investors will accept a lower rate of return they will pay a higher price for the shares.

Will the Market Value of a Perpetual Preferred Share (Paying