I CFA Problems l. Preferred stock yields often are lower than yields on bonds of the same quality because of: CLO 2-1) a. Marketability b. Risk c. Taxation d. Call protection
Answer is D. Call protection.
Generally Bonds are call protected and say redemption after 10 years and no call in between and it is the obligation of issuer to pay interest to bond holders. But the preferred stocks have the call option generally the issuer call the preferred stock when interest rate fall and issue lower interest rate bond or preferred stock at that time the preferred stockholders yield will lower than the Bond holder yield because Bond is not callable and needs to pay higher interest.
Otherwise in all cases the yield on preferred stock is higher by considering risk factor.
Marketability is also a important factor for selling financial instrument but now it is not the issue because of open market, otherwise this also a cause for yield.