115 CFA
File: Equity Investments - Reading 41 - 3. Preferred Stock Valuation

3. Preferred Stock Valuation

d. calculate the intrinsic value of a non-callable, non-convertible preferred stock;

What are the four basic types of preferred stock?
1. Cumulative - if the company withholds any part of expected dividends, these payments are in arrears and must be settled before any other dividends
2. Callable - gives the issuer the right to redeem the stock at a date and price outlined in the prospectus
3. Convertible - option for the preferred stockholder to convert the shares into a fixed number of common shares at any point after a pre-determined date
4. Participating - offers the investor the opportunity to earn a dividend beyond the stated rate as outlined in the prospectus

What is a retractable preferred share?
A retractable preferred share allows an investor to redeem the share whenever the investor wants. As a result, the value of the preferred share is increased.

  • CFA