Treehouse Inc.'s $50 par value preferred stock pays a dividend fixed at 8% of par. To earn 9% on an investment in this stock, you need to purchase the shares at a per share price of
A) $4.00.
B) $44.44.
C) $50.00.
D) $56.25.

Question

Quizplus · Accepted Answer

The dividend on the preferred stock is 8% of the $50 par value, which equals $4.00 per share ($50 * 0.08 = $4.00). To earn a 9% return on the investment, you divide the dividend by the desired return rate: $4.00 / 0.09 = $44.44.