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

Question

Quizplus · Accepted Answer

The current yield of the preferred stock is calculated by dividing the annual dividend by the current market price of the stock. The annual dividend is $6 (6% of $100 par value). The current market price is $102 per share. Therefore, the current yield is $6 / $102 = 0.0588 or 5.9%.

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