Question

Compared with common stock, preferred stock values

Select one:

a. are less variable.

b. are more variable.

c. are higher.

d. are lower.

Answer 1

The correct answer is " Are less variable"

Value of preferred stock is less variable and the dividend on these stocks are generally fixed. Threfore, the required return on these stocks are generally less volatile.

The common shareholder are paid dividend on the basis of the net income earned by the company and the required return of the shareholder changes according to the payout policy and many external factors. Threfore, The share price of the common stock are more volatile to change.