The floating rate feature on preferred stock allows the shareholders
A) to receive more dividends than the quoted yield when the firm enjoys a good year.
B) to pay lower taxes when the dividend yield increases.
C) to receive dividends that the corporation did not pay in previous years.
D) to receive a higher or lower dividend yield depending on current competitive market conditions.

Question

Quizplus · Accepted Answer

The floating rate feature on preferred stock allows shareholders to receive a variable dividend yield depending on current market conditions. When market rates increase, the dividend yield will also increase, and vice versa. This allows investors to potentially receive a higher return on their investment during good years and adjust to changing market conditions.

The Floating Rate Feature on Preferred Stock Allows the Shareholders