Question

Callable preferred stock is likely to be redeemed by the issuer if? a interest rates rise b interest rates fall c the common stock price rises d the common stock price falls

Answer 1

Callable preferred stock exists likely to be redeemed by the issuer if  interest rates fall.

What is Callable preferred stock?

The issuer may redeem callable preferred stock at a predetermined price prior to the maturity date. This kind of preferred stock is used by issuers for financing because they value the flexibility of being able to redeem it.

The preferred share is neither convertible nor callable. The preferred share has no maturity date and will always pay dividends. In a stock redemption, a company buys back its own stock from a shareholder in return for money or another asset. Unless it distributes valuable property, the redeeming corporation normally does not register gain or loss.

Hence,  Callable preferred stock exists likely to be redeemed by the issuer if  interest rates fall.

To learn more about Callable preferred stock refer to:

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