Ten years ago, Stigler Company issued $100 par value preferred stock yielding 6 percent. The preferred stock is now selling for $102 per share. What is the current yield or cost of the preferred stock? (Disregard flotation costs.)

Question

Quizplus · Accepted Answer

The current yield or cost of the preferred stock is calculated as the annual dividend divided by the current price. The annual dividend is $6 (6% of $100 par value), and the current price is $102. So, the yield is $6 / $102 = 5.9%.

Ten Years Ago, Stigler Company Issued $100 Par Value Preferred