Preferred Stock and Interest Rates

What this video covers

• Why preferred stock prices move inversely with interest rates, and how the seesaw relationship works just like bonds
• How fixed-rate, adjustable-rate, and callable preferred each respond differently to rate changes
• Why preferred stock carries more interest-rate risk than bonds with the same coupon: no maturity date means no pull to par
• How to calculate current yield using annual dividend divided by market price, and why discount means higher yield while premium means lower yield
• Why yield to maturity (YTM) is a trap answer on preferred stock questions, since current yield is the only valid yield measure
• Which type of preferred stock is suitable in falling versus rising rate environments
• Why callable preferred caps price appreciation when rates fall, and how the issuer benefits from calling and reissuing at lower rates