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Preferred Rates

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Definition of Preferred Rates

Preferred Rates Image 1

Preferred Rates

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Related Terms:

Adjustable rate preferred stock (ARPS)

Publicly traded issues that may be collateralized by mortgages and MBSs.


Auction rate preferred stock (ARPS)

Floating rate preferred stock, the dividend on which is adjusted every
seven weeks through a Dutch auction.


Convertible exchangeable preferred stock

Convertible preferred stock that may be exchanged, at the
issuer's option, into convertible bonds that have the same conversion features as the convertible preferred
stock.


Convertible preferred stock

preferred stock that can be converted into common stock at the option of the holder.


Cost of Preferred Stock

The rate of return required by the investors in the preferred stock of
a company. A component of the cost of capital.



Cross rates

The exchange rate between two currencies expressed as the ratio of two foreign exchange rates
that are both expressed in terms of a third currency.


Cumulative preferred stock

preferred stock whose dividends accrue, should the issuer not make timely
dividend payments. Related: non-cumulative preferred stock.


Preferred Rates Image 2

expectations theory of exchange rates

Theory that expected spot exchange rate equals the forward rate.


Floating-rate preferred

preferred stock paying dividends that vary with short-term interest rates.


Growth rates

Compound annual growth rate for the number of full fiscal years shown. If there is a negative
or zero value for the first or last year, the growth is NM (not meaningful).


Market segmentation theory or preferred habitat theory

A biased expectations theory that asserts that the
shape of the yield curve is determined by the supply of and demand for securities within each maturity sector.


Monthly income preferred security (MIP)

preferred stock issued by a subsidiary located in a tax haven.
The subsidiary relends the money to the parent.


Multiple rates of return

More than one rate of return from the same project that make the net present value
of the project equal to zero. This situation arises when the IRR method is used for a project in which negative
cash flows follow positive cash flows. For each sign change in the cash flows, there is a rate of return.


Non-cumulative preferred stock

preferred stock whose holders must forgo dividend payments when the
company misses a dividend payment.
Related: Cumulative preferred stock


Preferred Beneficiary

Used in older contracts to confer the same rights as an irrevocable beneficiary. Applied to family members.


Preferred equity redemption stock (PERC)

preferred stock that converts automatically into equity at a
stated date. A limit is placed on the value of the shares the investor receives.


Preferred Rates Image 3

Preferred habitat theory

A biased expectations theory that believes the term structure reflects the
expectation of the future path of interest rates as well as risk premium. However, the theory rejects the
assertion that the risk premium must rise uniformly with maturity. Instead, to the extent that the demand for
and supply of funds does not match for a given maturity range, some participants will shift to maturities
showing the opposite imbalances. As long as such investors are compensated by an appropriate risk premium
whose magnitude will reflect the extent of aversion to either price or reinvestment risk.


Preferred shares

preferred shares give investors a fixed dividend from the company's earnings. And more
importantly: preferred shareholders get paid before common shareholders. See: preferred stock.



Preferred Shares

Are equity instruments that take no security against assets, have flexible terms of repayment and pay fixed or floating dividends.


Preferred stock

A security that shows ownership in a corporation and gives the holder a claim, prior to the
claim of common stockholders, on earnings and also generally on assets in the event of liquidation. Most
preferred stock pays a fixed dividend that is paid prior to the common stock dividend, stated in a dollar
amount or as a percentage of par value. This stock does not usually carry voting rights. The stock shares
characteristics of both common stock and debt.


Preferred Stock

A type of equity security where holders have a claim on the assets
and earnings of a company after the debt providers but before the
holders of common stock. preferred stock generally pays a fixed
or floating rate dividend each year.


Preferred stock

A type of stock that usually pays a fixed dividend prior to any distributions
to the holders of common stock. In the event of liquidation, it must be paid
off before common stock. It can, but rarely does, have voting rights.


preferred stock

Stock that takes priority over common stock in regard to dividends.


Preferred stock agreement

A contract for preferred stock.


Preferred Stock Stock that has a claim on assets and dividends of a corporation that are prior

to that of common stock. preferred stock typically does not carry the right to vote.


Real exchange rates

Exchange rates that have been adjusted for the inflation differential between two countries.


Redeemable Preferred Stock

A preferred stock issue that must be redeemed by the issuing enterprise or is redeemable at the option of the investor. Considered a debt security for accountingpurposes.


Spot exchange rates

Exchange rate on currency for immediate delivery. Related: forward exchange rate.



Term Structure of Interest Rates

Relationship among interest rates on bonds with different terms to maturity.


Convertible Debenture

Are debt instruments that are convertible into common or preferred shares, take secondary or no security against assets, have flexible terms of repayment and charge fixed or floating interest rates.


Expectations hypothesis theories

Theories of the term structure of interest rates which include the pure
expectations theory, the liquidity theory of the term structure, and the preferred habitat theory. These theories
hold that each forward rate equals the expected future interest rate for the relevant period. These three theories
differ, however, on whether other factors also affect forward rates, and how.
Expectations theory of forward exchange rates A theory of foreign exchange rates that holds that the
expected future spot foreign exchange rate t periods in the future equals the current t-period forward exchange
rate.



 

 

 

 

 

 

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