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Ivan
3 years ago
15

The National Bank of Columbia has issued perpetual preferred stock with a $100 par value. The bank pays a quarterly dividend of

$1.40 on this stock. What is the current price of this preferred stock given a required rate of return of 8.5 percent?
Business
1 answer:
Effectus [21]3 years ago
6 0

Answer:

The correct answer is $65.88.

Explanation:

According to the scenario, computation of the given data are as follows:

Par value of preferred stock = $100

Dividend (quarterly) = $1.40

Rate of return = 8.5%

Rate of return (quarterly) = 8.5% ÷ 4 = 2.125%

So, we can calculate the current price by using following formula:

Current price = Dividend ÷ rate of return

By putting the value, we get

= $1.40 ÷ 2.125%

= $65.88

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Answer:

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E. increasing returns on its assets.

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