Holdup Bank has an issue of preferred stock with a stated dividend of $7 that just sold for $87 per share. What is the bank's cost of preferred?
A) 7.00 percent
B) 7.64 percent
C) 8.39 percent
D) 8.05 percent
E) 7.54 percent

Question

Quizplus · Accepted Answer

The cost of preferred stock is calculated by dividing the stated dividend by the current price per share. So, $7 / $87 = 0.0805 or 8.05%.

Holdup Bank Has an Issue of Preferred Stock with a Stated