A firm has an issue of preferred stock outstanding that has a par value of $100 and a 4% dividend. If the current market price of the preferred stock is $50, the yield on the preferred stock is ________.
A) 4.00%
B) 6.00%
C) 8.00%
D) 12.00%

Question

Quizplus · Accepted Answer

The yield on the preferred stock is calculated by dividing the annual dividend by the current market price. The annual dividend is 4% of the $100 par value, which is $4. Dividing $4 by the current market price of $50 gives a yield of 8%.

A Firm Has an Issue of Preferred Stock Outstanding That