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A preferred stock has a $100 par value and a dividend payout of $5 every 6 months. Your required rate of return is 10%. What is the value of the preferred stock?
A. none of these answers
B. $50
C. $75
D. $99
Answer: A
Explanation:
Explanation/Reference:
Explanation:
The value of a preferred stock is the stated annual dividend divided by the required rate of return on preferred stock.
In this case, V = $10 a year/.10 = $100
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