SIE practice questionhardPreferred Stock — Adjustable Rate
Which type of preferred stock offers the LEAST interest rate risk?
- AStraight (fixed-rate) preferred stock
- BAdjustable-rate preferred stock✓ Correct answer
- CCallable preferred stock
- DConvertible preferred stock
Explanation
Why B — Adjustable-rate preferred stock
Adjustable-rate (variable-rate) preferred stock has dividend rates that reset periodically based on a benchmark rate. Because the dividend adjusts with market rates, the price stays relatively stable, resulting in the least interest rate risk. Fixed-rate preferred (A) is most sensitive to rate changes. Callable preferred (B) has reinvestment risk. Convertible preferred (D) has equity-like price behavior.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Equity Securities questions
- A company has 50 million shares outstanding trading at $30 per share. What is its market capitalization?
- An investor owns 200 shares of XYZ stock at $80 per share. After a 2-for-1 stock split, the investor will have:
- All of the following are characteristics of stock rights EXCEPT:
- A callable preferred stock is MOST likely to be called by the issuer when: