The value of preference shares is affected by changes in interest rates.

Question

Quizplus · Accepted Answer

Preference shares typically pay fixed dividends, so changes in interest rates can affect their attractiveness to investors. If interest rates increase, newer preference shares may offer higher dividend yields, making older preference shares with lower yields less attractive and potentially causing their value to decrease. Conversely, if interest rates decrease, the fixed dividend yield on existing preference shares may become more attractive, potentially increasing their value.

The Value of Preference Shares Is Affected by Changes in Interest