Which of the following statements about floating-rate preferred stock is correct?
A)its dividends increase as interest rates increase.
B)its market price increases at a set rate annually.
C)it is the only stock issued without a par value.
D)its dividends are deductible for tax purposes by the paying corporation.

Question

Quizplus · Accepted Answer

Floating-rate preferred stock has dividends that are tied to a benchmark interest rate, typically the LIBOR or the Treasury rate. As the benchmark rate increases, the dividend rate on the stock also increases, providing investors with protection against rising interest rates.

Which of the Following Statements About Floating-Rate Preferred Stock Is