Holding all other variables constant, as the return on a preferred stock increases, the value of the stock decreases.

Question

Quizplus · Accepted Answer

This is because the value of a preferred stock is typically calculated as the dividend divided by the discount rate (which is the required return). If the return (or required rate of return) increases, the denominator in this calculation increases, leading to a decrease in the value of the stock.

Holding All Other Variables Constant, as the Return on a Preferred