Question

The First Bank of Flagstaff has issued perpetual preferred stock with a $100 par value. The bank pays a quarterly dividend of $1.60 on this stock. What is the current price of this preferred stock given a required rate of return of 12.8 percent? (Round answer to 2 decimal places, e.g. 15.25.) Current price $enter the current price of the preferred stock rounded to 2 decimal places

Answer 1

Preferred stock price	Annual dividend÷Required rate
Here,
Annual dividend	$                                                6.40	=1.6*4
Required rate	12.80%
Preferred stock price	$                         50.00
	6.4÷12.8%