Commonwealth Edison Co. (Commonwealth Edison), through its underwriters, sold 1 million shares of preferred stock at an offering price of $ 100 per share. Commonwealth Edison wanted to issue the stock with a dividend rate of 9.26 percent, but its major underwriter, First Boston Corporation (First Boston), advised that a rate of 9.44 percent should be paid. According to First Boston, a shortage of investment funds existed, and a higher dividend rate was necessary for a successful stock issue. Commonwealth Edison’s management was never happy with the high dividend rate being paid on this preferred stock. Nine months later, Commonwealth Edison’s vice chairman was quoted in the report of the annual meeting of the corporation as saying “we were disappointed at the 9.44 percent dividend rate on the preferred stock we sold last August, but we expect to refinance it when market conditions make it feasible.” Commonwealth Edison, pursuant to the terms under which the stock was sold, bought back the one million shares of preferred stock at a price of $ 110 per share. What type of preferred stock is this? The Franklin Life Insurance Company v. Commonwealth Edison Company, 451 F. Supp. 602, 1978 U. S. Dist. Lexis 17604 (United States District Court for the Southern District of Illinois)

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