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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

Why would a company choose to issue floating-rate as opposed to fixed-rate preferred stock?

Summary Introduction

To Determine: The reason on why a company must prefer to issue floating-rate as contrasting to fixed-rate preferred stock.

Introduction: A floating interest rate alludes to a changeable interest rate that progressions over the length of the debt obligation. It is the contrary option in contrast to a fixed interest rate credit, where the interest rate stays consistent for the duration of the life of the debt.

Explanation

The reason on why a company must prefer to issue floating-rate as contrasting to fixed-rate preferred stock are as follows:

The floating-rate preferred stock, in view of the floating rate of return, has a moderately steady cost...

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