Question

Holdup Bank has an issue of preferred stock with a stated dividend of $4.25 that just sold for $93 per share. What is the bank’s cost of preferred stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

Answer:

cost of preferred stock will be equal to 4.56 %

Explanation:

We have given dividend on the preferred stock = $4.25

As the stock is sold for $93 per share so current price = $93

We have to find the preferred stock

We know that preferred stock is given by

Preferred stock $=\frac{dividend}{current\ price}=\frac{4.25}{93}=0.0456$ = 4.56 %

So cost of preferred stock will be equal to 4.56 %