In 2004,Smiths Corp.issued a $50 par value preferred stock that pays a 6 percent annual dividend.Due to changes in the overall economy and in the company's financial condition investors are now requiring an 7 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) $42.86
B) $30.00
C) $31.54
D) $33.38
E) $38.37

Question

Quizplus · Accepted Answer

$$\text { Drymend } = . 06 \times 450 = 3 \quad \therefore \text { price } = 3 \div 0 . 0 7 = 442.85$$