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06-03-2020
Business

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A firm's preferred stock pays a $4.25 dividend per year. Suppose the requred rate of return on the stock is 9%. What is the price of one share of preferred stock

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andromache andromache

07-03-2020

Answer:

$47.22

Explanation:

The computation of the price of the preferred stock is shown below:

Price of preferred stock = Annual dividend ÷ required rate of return on the stock

= $4.25 ÷ 9%

= $47.22

Simply we divide the annual dividend by the required rate of return on the stock so that the correct price of preferred stock can be computed

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