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huskyhottie
Jan 23, 2007, 12:14 AM
Bob’s Bank just issued some new preferred stock. The issue will pay a $7.00 annual dividend in perpetuity, beginning four years from now. If the market requires a 6 percent return on this investment, how much does a share of preferred stock cost today?

bunnyKutty
Sep 25, 2009, 09:17 PM
rate of return on preferred stock = preferred dividend/ Current market price of preferred stock

6% = 7.00/ price of preferred stock

Price of preferred stock = 7.00/ 6%

= $116.67

morgaine300
Sep 26, 2009, 05:06 PM
You might want to check out the new threads instead of the 2-year old ones.