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15. Preferred stock Preferred stock is often called a hybrid security because it has some characteristics that are typical of debt and others that are typical of comman equity. The following table lists several characteristics of preferred stock. Determine which of these characteristics are consistent with debt securities and which are consistent with common stock. Debt Common stock Characteristic Some issues have a stated maturity date Failure to pay its dividend does not send the firm into bankruptcy. Consider the case of Cold Goose Metal Works: Cold Goose Metal Works pays an annual dividend rate of 10.60% on its preferred stock that currently returns 14.20% and has a par value of $100.00 per share. The preferred stock issue does not mature, and computes its annual dividend as the product of its dividend rate and its par value. What is the current market value of Cold Goose's preferred stock? $74.65 per share $80.62 per share $65.69 per share $103.02 per share Suppose that due to high inflation, interest rates rise and pull the preferred dividend yield to 20.59%. Then the value of Cold Goose's preferred stock will This is because interest rates and security returns) and security values are related to $80.62 per share $65.69 per share increase 02 per share decrease Supl Je to high inflation, interest rates rise and pu will to This is because interes $74.65 per share $80.62 per sh $73.16 $65.69 per sh $68.68 $103.02 per $51.48 $80.62 oppose that due to his interest rates rise and pull the prefe . This is because interest rates (ar to the produc inversely directly Goose's preferred stock related yield to 20.59%. Then the va turns) and security values are Save & Continue Grade It Now Continue without saving FIX F10 F9

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