Cost of preferred stock | = | Annual coupon | / | Current Price | |||
= | 10 | / | 96 | ||||
= | 10.42% | ||||||
Working: | |||||||
Suppose par value is 100. | |||||||
Annual coupon | = | Par value * Coupon rate | |||||
= | 100*10% | ||||||
= | 10 | ||||||
Current Price | = | Par Value * % of Par Value | |||||
= | 100*96% | ||||||
= | 96 | ||||||
Marme Inc has preferred stock selling for 96 percent of par that pays an annual coupon...
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