Determine the market price of a $50 par value preferred share that pays annual dividends based on a 4.0% dividend rate when the market rate is 5%?

Question

Quizplus · Accepted Answer

The market price of a preferred share can be calculated using the formula: Market Price = (Dividend per share / Market Rate). Here, the dividend per share is $50 * 4% = $2. Using the market rate of 5%, the calculation is $2 / 5% = $40.

Determine the Market Price of a $50 Par Value Preferred