Question

ABC Co., preferred stock has a par value of $249.17 with a preferred dividend rate of 8.27%. If the required rate of return on preferred stock is 14.53%, what is today's price of preferred stock?

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box.

Answer 1

Price of preferred stock = Annual dividend/Required Rate of Return

Annual dividend on preferred stock = Dividend rate * Par Value

Annual dividend = 8.27% * $249.17 = $20.61

Price on preferred stock = $20.61/14.53% = $141.82