Morris, Inc. has some 8% preferred stock outstanding. The par value of the preferred stock is $100. How much are you willing to pay for one share of Morris preferred stock if you require a 7% rate of
Return?

Question

Quizplus · Accepted Answer

To calculate the price of the preferred stock, we use the formula: 
Price of Preferred Stock = Dividend / Required Rate of Return
The dividend is the par value multiplied by the dividend rate which is 8% of $100 = $8. 
Required Rate of Return is given in the problem and is 7%.

Price of Preferred Stock = $8 / 0.07 = $114.29 approximately.

Therefore, the best choice is C, $114.29.