Question

For a given constant required rate of return, the greatest portion of a preferred stockholder's return comes from increases in the price of preferred stock.

a. True
b. False

Answer 1

The answer to this question is False. A preferred shares have qualities of both a stock and a bond. While the owner of the share is part of owner of the company, their payment is in the form of a dividend. The payments could come monthly, quarterly, or yearly depending on the company's stated policy.