Use the following three statements to answer this question

1. Dividends are the legal obligation of the firm 2. A firm's residual earnings technically belong to the preferred shareholders 3. The market prices of preferred shares increase when market rates decline, and vice versa

A) only 1 is correct

B) only 2 is correct

C) only 3 is correct

D) 2 $ 3 are correct

E) 1 & 3 are correct