When would a company be likely to call its preferred stock?
A) If it decides it would rather have corporate bonds
B) When it needs additional long-term financing
C) As the preferred stock matures and must be redeemed
D) When the call premium becomes high enough to justify the call
E) When it can issue new common stock to replace the preferred stock

Question

Quizplus · Accepted Answer

A company is likely to call its preferred stock when it can issue new common stock to replace it, especially if the cost of issuing new common stock is lower than the cost of the preferred stock.

When Would a Company Be Likely to Call Its Preferred