Question

DEF Corporation had two issues of ordinary preferred stock with a $100 par value traded on the NYSE. One issue paid $5.56 annually per share and sold for $95.55 per share. The other paid $5.88 per share annually and sold for $97.50 per share. What is DEF’s Corporation’s cost of preferred stock?

Answer 1

Answer:

5.93%

Explanation:

Cumulative Dividend for both (5.56+5.88)          $11.44

share price for both types of preferred stock (95.55+97.5) $193.05

Cost of preferred stocks $11.44/193.05=5.93%