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dmitriy555 [2]
3 years ago
10

LTM, Inc. has an issue of preferred stock whose par value is $1,000. The preferred stock pays a 4.5% dividend. If investors requ

ire a 5.5% rate of return for these shares, what price should the preferred stock sell for?
Business
1 answer:
Elena L [17]3 years ago
7 0

Answer:

Explanation:

return on preferred stock (rp) = Dividend/ Current price

rate of return  = 5.5% or 0.055 as a decimal

Dividend amount = dividend rate * par value ;

Dividend amount = 4.5% * 1000 = $45

Current price = ?

Next, plug the numbers to the formula above to find Price;

0.055 = 45/ Price

0.055Price = 45

Divide both sides by 0.055;

Price = 45/ 0.055

Price = $818.18

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g Builtrite has calculated the average cash flow to be $16,000 with a standard deviation of $4000. What is the probability of a
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