Question

If all other factors are equal, an investor would expect which type of preferred stock to pay the highest stated dividend rate

Answer 1

Answer: a. Callable

Step-by-step explanation:

A Callable stock will most likely have the highest stated dividend from the options listed. This is because a Callable stock by definition, can be bought/ called back by the company in the future at a fixed price if they want to.

This means that the owner of the share is at a disadvantage as the stock cannot increase past the value the company can call it back for and they could lose the stock to the company at anytime. The company will therefore offer a higher dividend for this inconvenience.