Homework Answers
Answer: The correct option is "reduce the price of preferred
stock"
The formula for valuing preferred stock is:
Value of the preferred stock=(Annual dividend)/(Required rate of
return)
Here, the required rate of return is the discount rate
Now, if the value of the discount rate is higher, then the
denominator will be higher and this will reduce the value of the
stock.
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1. Why do callable bonds usually pay a higher coupon rate than noncallable bonds? A. To...
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