Question

What should be the prices of the following preferred stocks if comparable securities yield 2 percent? Use Appendix B and Appendix D to answer the questions. Round your answers to the nearest cent.

MN, Inc., $8 preferred ($130 par)

$  

CH, Inc., $8 preferred ($130 par) with mandatory retirement after 8 years

$  

What should be the prices of the following preferred stocks if comparable securities yield 6 percent? Round your answers to the nearest cent.

MN, Inc., $8 preferred ($130 par)

$  

CH, Inc., $8 preferred ($130 par) with mandatory retirement after 8 years

$  

In which case did the price of the stock change?

As with the valuation of bonds, an increase in interest rates causes the value of preferred stock to ____ (fall or rise)

In which case was the price more volatile?

While the prices of both preferred stocks _____ (declined or increased) , the price of the _____(perpetual preferred stock or stock with mandatory retirement) was more volatile.

Appendix B

$Appendix_B.jpg$

Appendix D

$Appendix_D.jpg$

Answer 1

MN, Inc., $8 preferred ($130 par)
=8/2%
=400.00

CH, Inc., $8 preferred ($130 par) with mandatory retirement after 8 years

=8*7.325+130*0.853
=169.49

What should be the prices of the following preferred stocks if comparable securities yield 6 percent? Round your answers to the nearest cent.

MN, Inc., $8 preferred ($130 par)

=8/6%
=133.3333333

CH, Inc., $8 preferred ($130 par) with mandatory retirement after 8 years

=8*6.210+0.627
=50.307

In which case did the price of the stock change?

As with the valuation of bonds, an increase in interest rates causes the value of preferred stock to fal

In which case was the price more volatile?

While the prices of both preferred stocks declined , the price of the perpetual preferred stock was more volatile.