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-   -   the par value of the preferred stock is $100. Suppose (https://www.askmehelpdesk.com/showthread.php?t=709553)

  • Oct 16, 2012, 04:01 PM
    TaraWithers
    the par value of the preferred stock is $100. Suppose
    A preferred stock is expected to pay every quarter into indefinite future, the following dividend yield, dented by DY:
    DY = The annualized yield on 3-months Treasury Bill, prevailing at the time of payment +4%

    The par value of the preferred stock is $100. Suppose the annualized yield on 3-month Treasury Bill is expected to be as: 1.5% at the first quarter, 2% at the end of the 2nd quarter, 2.5% at the end of the 3rd quarter, 3% at the end of the 4th quarter and 4% at the end of the 5th quarter and thereafter into indefinite future. Suppose the required expected rate of return is 6% per annum in the first four quarters and 8% per annum thereafter into indefinite future.
    Calculate the current price of the preferred stock?

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