Equities: Preferred Stock

A corporation has issued $100 par, 6.5% cumulative convertible preferred stock, callable at par. The preferred share is convertible into 2 shares of common stock. Currently, the preferred stock is trading at $100 while the common stock is trading at $50. If a customer buys 100 preferred shares, converts and then sells the common shares on the market, the profit/loss is...

$0 100 x 100 = 10,000 2 x 100 =200 common shares 200 x 50 = 10,000 10,000 - 10,000 = 0

XYZ Company has issued 10%, $100 par noncumulative preferred stock. Two years ago, XYZ omitted its preferred dividend. Last year, it paid a preferred dividend of $5 per share. This year, XYZ wishes to pay a common dividend. In order to make the distribution to shareholders, each preferred share must be paid a dividend of...

$10 10% on $100 par = $10

A customer buys 100 shares of preferred at $51 per share. Par value is $50. The dividend rate is 8%. Each dividend payment would be...

$200 .08 x 50 = $4 per share $4 x 100 shares = $400 $400 paid semi-annually = $200

A corporation has issued $100 par, 8% cumulative convertible preferred stock callable at par. The preferred is convertible into 1.4 shares of common stock. Currently, the preferred stock is trading at $102, while the common stock is trading at $75.50. Corporation calls the preferred stock at par plus accrued dividends of $2 per share. If the customer buys 100 preferred shares, converts, and then sells the common shares on the market, the profit is...

$370 100 x 102 = $10,200 1,4 x 100 = 140 common shares 140 x 75.50 = $10,570 $10,570 - $10,200 = $370

A customer buys 100 shares of preferred stock at $80 per share. The par value is $100. The dividend rate is 10%. The customer will receive how much in each dividend payment?

$500 10% of $100 par = $10 $10 x 100 shares = $1,000 1,000/2 = $500

ABC corporation has outstanding 10% noncumulative preferred stock. Two years ago, ABC paid a 7% preferred stock dividend. This year, ABC wishes to pay a common dividend. The preferred shareholder must receive...

10% Since it is a noncumulative preferred share, the corporation will only have to pay 10%

Preferred stock market valuation is based primarily upon:

Long term market interest rate levels

A customer holds 100 shares of ABC corporations $100 par non-convertible preferred stock. If ABC declares and pays a 10% common stock dividend, then as of the payable date, the customer will now have...

100 shares of ABC preferred stock 10% common stock dividend, preferred stockholder wouldn't benefit

ABC corporation has issued 10%, $100 par preferred stock that is trading at $120. The current yield is...

8.33% $10 / $120 = 8.33%

Dividend on preferred stock may only be paid in:

Cash

Preferred Dividends may be paid as: A. cash B. stock C. stock of another company

Cash

A corporation issues $100 par convertible preferred stock, convertible at $20 per share when the common stock is trading at $10. The preferred stock is issued under an 'anti-dilutive covenant.' If a company declares a 25% stock dividend...

Conversion price is adjusted to $16 Conversion ration is adjusted to 6.25:1

Income from all of the following securities is partially tax exempt to a corporate investor EXCEPT: A. preferred stock mutual funds B. convertible bonds C. preferred stock D. common stock

Convertible bonds

All of the following statements are true about preferred stock EXCEPT: A. Preferred dividends are paid before common B. in most cases dividends are paid semi-annually C. Corporations must pay preferred dividends D. preferred shareholders are paid before common shareholders upon liquidation of a corporation

Corporations must pay preferred dividends

A corporation issues $100 par convertible preferred stock, convertible at $10 per share, when the market price of the common stock is currently $5. Which statement is TRUE? A. The conversion ratio is 10:1 B. The conversion ration is 5:1 C. The conversion ratio is 2:1 D. The conversion ration cannot be determined

The conversion ratio is 10:1 $100 par/$10 conversion price

Callable preferred stock is likely to be redeemed by the issuer when interest rates:

fall

Which of the following statements are TRUE when comparing convertible preferred stock and non-convertible preferred stock. A. convertible preferred stock will have a higher yield than non-convertible preferred stock B. convertible preferred stock will have a lower yield than non-convertible preferred stock C. convertible preferred stock benefits as the market price of the common stock rises D. convertible preferred stock benefits as the market price of the common stock falls

convertible preferred stock will have a lower yield than non-convertible preferred stock convertible preferred stock benefits as the market price of the common stock rises

Common and preferred stockholders both have:

dividend rights

As interest rates rise, preferred stock prices will...

fall

Which security of the same issuer is likely to give the highest current yield? A. Warrant B. common stock C. convertible preferred stock D. non-convertible preferred stock

non-convertible preferred stock

All of the following are types of preferred stock EXCEPT: A. performance B. participating C. cumulative D. refundable

refundable

All of the following are terms associated with preferred stock EXCEPT: A. renewable B. cumulative C. negotiable D. convertible

renewable

A corporation has issued $100 par, 8% convertible preferred stock callable at par. Preferred stock is convertible into 1.4 shares of common stock. Currently, preferred stock is trading at $102, while the common stock is trading at $75.50. Corp calls the preferred stock at par plus accrued dividends of $2 per share. To realize the largest profit, a customer that purchased 100 shares at par should...

sell short the common stock and convert the preferred for delivery to cover the short