A preferred stock has a par value of $110 and pays an annual dividend of 5%...

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A preferred stock has a par value of $110 and pays an annual dividend of 5%...

A preferred stock has a par value of $110 and pays an annual dividend of 5% of par. If similar investments have an annual rate of return of 3%, what is the current value of this preferred stock? (round to nearest cent).

Can you please show me how to do this. ThanK You!!!

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Answer 1

Answer #1

Par value = $110

Annual Dividend = $110 * 5% = $5.50

Annual rate of return = 3%

Current value of the Preferred stock = Annual Dividend / Annual rate of return

Current value of the Preferred stock = $5.50 / 0.03

Current value of the Preferred stock = $183.33

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Answer 2

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