Monty's issued an 8% preferred stock with a $100 par value. The stock currently is yielding 6%. What is the current price?

Question

Monty's issued an 8% preferred stock with a $100 par value.   The stock currently is yielding 6%.   What is the current price?

Quizplus · Accepted Answer

To find the current price of the preferred stock, we need to use the formula: Current Price = Annual Dividend / Required Return. The annual dividend is $8 (8% of $100), and the required return is 6%. Thus, Current Price = $8 / 0.06 = $133.33, which rounds down to answer choice C.

Monty's Issued an 8% Preferred Stock with a $100 Par