Most floating-rate preferreds have both a floor and a ceiling on their dividend rate. (See Section 31.5,

Question:

Most floating-rate preferreds have both a floor and a ceiling on their dividend rate. (See Section 31.5, footnote 28.) How do these limits affect the behavior of the prices of these securities as interest rates change? Why do you think the companies included the limits in the first place?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...