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)

The answer is $183.33 but please show work how to get answer, preferably how to find it in excel.

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Answer 1

Answer #1

Annual dividend=$110*5%=$5.5

Hence current value=Annual dividend/Annual rate of return

=5.5/0.03

which is equal to

=$183.33 (Approx).

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Answer 2

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