Question

Barnes Air Conditioning Inc. has two classes of preferred stock: floating rate preferred stock and straight (normal) preferred stock. Both issues have a par value of $100. The floating-rate preferred stock pays an annual dividend yield of 6 percent, and the straight preferred stock pays 7 percent. Since the issuance of the two securities, interest rates have gone up by 1.00 percent for each issue. Both securities will pay their year-end dividend today.

a. What is the price of the floating-rate preferred stock most likely to be? (Do not round intermediate calculations and round your answer to 2 decimal places.)
  

b. What is the price of the straight preferred stock likely to be? (Do not round intermediate calculations and round your answer to 2 decimal places.)
  

Answer 1