Alpine Ski Equipment has 2 million preferred shares issued at a stated value of $40.The preferred shares are currently selling at $33.25 per share and the required rate is 8.42%.What is the dividend rate?

Question

Quizplus · Accepted Answer

The dividend rate is calculated based on the stated value and the required rate. Since the stated value is $40 and the required rate is 8.42%, the dividend per share is $40 * 8.42% = $3.368. To find the dividend rate based on the current selling price, we use the formula: Dividend per Share / Current Price per Share. Thus, $3.368 / $33.25 ≈ 10.13%. However, the question asks for the dividend rate based on the stated value and required rate, which is directly 8.42%, indicating a misunderstanding in the explanation process. The correct approach should directly apply the required rate to the stated value, making the dividend rate 8.42% as it is the rate applied to the stated value to determine the dividend. However, given the choices and the initial explanation, there seems to be a confusion in the interpretation of the question. The correct dividend rate should reflect the percentage of the stated value that is paid out in dividends, which is directly given by the required rate of 8.42% in this context, making the explanation incorrect. The correct answer, based on the required rate directly, should be B) 8.42%, but the initial guidance mistakenly led to A) without correctly interpreting the dividend rate's calculation method.

Alpine Ski Equipment Has 2 Million Preferred Shares Issued at a Stated