In 2009, Smiths Corp. issued a $50 par value preferred stock that pays a 6% annual dividend. Due to changes in the overall economy and in the company's financial condition investors are now requiring a 7% return. What price would you be willing to pay for a share of the preferred if you receive your first dividend one year from now?
A) $42.86
B) $30.00
C) $31.54
D) $33.38
E) $38.37

Question

Quizplus · Accepted Answer

Dividend = .06 ´ $50 = $3 \Price = 3 ¸ 0.07 = $42.85