In 2004,Montpelier Inc.issued a $100 par value preferred stock that pays a 9 percent annual dividend.Due to changes in the overall economy and in the company's financial condition investors are now requiring a 10 percent return.What price would you be willing to pay for a share of the preferred if you receive your first dividend one year from now?
A) $100
B) $110
C) $75
D) $90
E) $85

Question

Quizplus · Accepted Answer

$$\text { Dvicend } = .09 \times \$ 100 = \$ 9 \quad \therefore \text { Price } = 9 \div 0 .1 = \$ 90$$