he preferred stock of Denver Savings and Loan pays an annual dividend of $6.40. It has a required rate of return of 8 pe...
he preferred stock of Denver Savings and Loan pays an annual dividend of $6.40. It has a required rate of return of 8 percent. Compute the price of the preferred stock.
Homework Answers
Price of preferred stock is given by:
Price of preferred stock = Preferred stock dividend / Required rate of return
Given: Preferred stock dividend = $6.4, Required rate of return = 8%
Putting theses values in the above formula, we get,
Price of preferred stock = $6.4 / 8%
Price of preferred stock = $6.4 / 0.08 = $80
So, price is $80.
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