Which is a characteristic of the price of preferred stock?
A)Since preferred stock dividends are fixed, they are tax-deductible.
B)Because preferred stock has no maturity, the price analysis is similar to that of debt.
C)Preferred stock is valued as a perpetuity.
D)None of these options

Question

Quizplus · Accepted Answer

The price of preferred stock is usually determined by the perpetuity formula, which takes into account the fixed dividend payments and the required rate of return. Option A is incorrect as preferred stock dividends are not tax-deductible. Option B is incorrect as preferred stock does not have a maturity date like debt instruments.

Which Is a Characteristic of the Price of Preferred Stock