The value of a $30 par value preferred share that pays annual dividends based on a 6% dividend rate, when the market yield is 7%, is closest to:

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Quizplus · Accepted Answer

The value of a preferred share can be calculated using the formula: Value = (Dividend per share / Market yield). Here, the dividend per share is 6% of the $30 par value, which equals $1.80. Using a market yield of 7%, the value = $1.80 / 0.07 = $25.71.

The Value of a $30 Par Value Preferred Share That