A company issued preferred shares two years ago, paying a $3.29 dividend, which offered investors an...

A company issued preferred shares two years ago, paying a $3.29 dividend, which offered investors an original yield of 8%. Currently, the required return on companies with preferred shares of comparable risk yield 11%. Given this information, what should these shares be trading for today?

Expert Solution

Stock should be trading at $29.91

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Price of preferred stock = annual dividend/ required rate of return

= 3.29/ 0.11

= $29.91

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jeff jeffy answered 2 years ago

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