In 2004,Venus Fly Co.issued a $75 par value preferred stock which pays a 7 percent annual dividend.Due to changes in the overall economy and in the company's financial condition investors are now requiring a 5 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) $125
B) $84
C) $91
D) $145
E) $105

Question

Quizplus · Accepted Answer

$$\text { Divand } = .07 \times \$ 75 = \$ 5.25 \quad \therefore P _ { \text {rice } } = 5.25 \div0 .05 = \$ 105$$