A share of preferred stock is currently selling for $160. It offers the investor a dividend rate of 7%, with a par value of $100. If the company is able to pay dividends, preferred stockholders would receive a dividend of $11.20 per share.

Question

Quizplus · Accepted Answer

Par value is the basis for the dividend the firm is willing to pay to preferred stockholders. In this case, 7% of $100 is an $7 dividend.

A Share of Preferred Stock Is Currently Selling for $160