What is the value of a preferred stock that has a par value of $100, a required rate of return of 11%, and pays a 7% annual dividend?
A) $63.64
B) $157.14
C) $909.09
D) $1,428.57
E) $2,500.00

Name: What is the value of a preferred stock that has a par value of $100, a required rate of return of 11%, and pays a 7% annual dividend? A) $63.64 B) $157.14 C) $909.09 D) $1,428.57 E) $2,500.00
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Question

Quizplus · Accepted Answer

Dividend = .07*$100 = $7. Value of a perpetuity = D/k = $7/.11 = $63.64

What Is the Value of a Preferred Stock That Has