Even though the dividend rate on an Adjustable-Rate Preferred Stock (ARPS) is floating to keep in line with interest rates, the instrument still suffers from risk such as:

Question

Quizplus · Accepted Answer

A) ARPS may have a thinner market than other preferred stocks, which could lead to difficulties in selling the instrument and potentially result in principal risk and liquidity concerns.
B) ARPS issuers typically have a narrower range than those of other preferred stocks, which may create more significant risk of downgrades.
C) Changes in tax laws may impact the after-tax value of ARPS.
Therefore, the ARPS still suffers from risks despite the dividend rate being adjustable, suggesting that all of the above options are correct.

Even Though the Dividend Rate on an Adjustable-Rate Preferred Stock