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N76 [4]
3 years ago
11

A utility company pays an annual dividend of $20 (paid quarterly), a stated or par value of $200, and has a maturity of 10 years

because of a sinking fund requirement. Similarly risky securities have market yields of 8%, at what price will this preferred stock sell
Business
1 answer:
Ray Of Light [21]3 years ago
8 0

Based on the annual dividend on the stock and the market yeild of similar securities, the preferred stock will sell at $227.36.

<h3>How much will the stock sell for?</h3>

This can be found as:

= Dividend x (1 - ( 1 + rate) ^- number of years) / rate

The dividend is quarterly so the rate is:

= 8% / 4

= 2%

Number of periods is:

= 10 x 4

= 40 quarters

Dividend is:

= 20 / 4

= $5

Selling price is:

= 5 x (1 - (1 + 2%)⁻⁴⁰) / 2%

= $227.36

Find out more on preferred stocks at brainly.com/question/18068539.

#SPJ1

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