Preferred Stock Valuation Several years ago, Rolen Riders issued preferred stock
ID: 2649310 • Letter: P
Question
Preferred Stock Valuation
Several years ago, Rolen Riders issued preferred stock with a stated annual dividend of 12% of its $100 par value. Preferred stock of this type currently yields 7%. Assume dividends are paid annually.
What is the value of Rolen's preferred stock? Round your answer to the nearest cent.
$
Suppose interest rate levels have risen to the point where the preferred stock now yields 15%. What would be the new value of Rolen's preferred stock? Round your answer to the nearest cent.
$
Explanation / Answer
Answer:
Given Preferred stock yield = 7%
Preferred stock yield = [ Dividend + (Value of Share