Joe Divola buys a share of preferred stock that has a par $100 with a 5%...
Joe Divola buys a share of preferred stock that has a par $100 with a 5% annual dividend. If the investor needs a 9% return to invest, how much can he pay today?
Homework Answers
rate positively ..
| computation of preferred stock price | |||||
| annual dividend= | 5 | ||||
| 100*5% | |||||
| Required rate = | 9% | ||||
| Preferred stock price = annual dividend/Required rate | |||||
| 5/9% | |||||
| $ 55.56 | |||||
| Ans = | $ 55.56 | ||||
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