What does preferred stocks tend to move with changing interest rates mean?

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Social Studies

Gunnar Walls

8 August, 00:05

What does preferred stocks tend to move with changing interest rates mean?

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Christian Merritt · Answer 1

A preferred stock pays a small amount out than a bond would, but that amount is based on a percentage or interest rate. As interest rates move up, the preferred stock will move down. If interest rates move down, the price of the stock will move up. That happens because the preferred stock is seen as paying out more than the government bonds whose payout depends on what the interest rate is.