Question

A $1,000 face value preferred share with an annual coupon of $60 is available on the...

A $1,000 face value preferred share with an annual coupon of $60 is available on the market. What is the value of this preferred share if the relevant discount rate for valuation purposes is 7%?
Select one:
a. $1,062.22
b. $1,000.00
c. $857.14
d. $796.73

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Solution:

The formula for calculating the value of a preferred share is

= Annual coupon / Discount rate

As per the information given in the question we have

Annual coupon = $ 60 ; Discount rate = 7 % = 0.07 ;

Applying the above information in the formula we have the value of preferred share as

= $ 60 / 0.07

= $ 857.142857

= $ 857.14 ( when rounded off to two decimal places )

Thus the value of this preferred share is = $ 857.14

The solution is option c. $ 857.14

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A $1,000 face value preferred share with an annual coupon of $60 is available on the...
A $1,000 face value preferred share with an annual coupon of $60 is available on the market. What is the value of this preferred share if the relevant discount rate for valuation purposes is 7%? Select one: a. $1,062.22 b. $1,000.00 c. $857.14 d. $796.73 e. None of the above
1.A $1,000 face value preferred share with an annual coupon of $60 is available on the...
1.A $1,000 face value preferred share with an annual coupon of $60 is available on the market. What is the value of this preferred share if the relevant discount rate for valuation purposes is 7%? Select one:a. $1,062.22b. $1,000.00c. $857.14d. $796.73e. None of the above
An 8-year bond with a face value of $1,000 has a coupon of 4.56% and the...
An 8-year bond with a face value of $1,000 has a coupon of 4.56% and the market is pricing the bond to yield 5.37%. This is a ________ bond. Group of answer choices par discount premium zero coupon Kurt's Steel, Inc. offers a preferred stock with an annual dividend of $3.00 per share. Investors currently require a return of 6.15% on this preferred stock. What should be the current market price of this preferred stock? Group of answer choices $39.75...
Portland Brewery Inc. recently issued 30-year ​$1,000 face​ value, 12% annual coupon bonds. The market discount...
Portland Brewery Inc. recently issued 30-year ​$1,000 face​ value, 12% annual coupon bonds. The market discount rate for this bond is only​ 7%. What is the current price of this​ bond?
1. Maturity (years) = 5 Face Value = $1,000 Coupon Rate = 3.00% Price = $900...
1. Maturity (years) = 5 Face Value = $1,000 Coupon Rate = 3.00% Price = $900 Coupon (Annual) What is the YTM (annual) of the above bond? A 5.38% B 5.30% C 5.33% D 4.80% E 5.36% 2. Consider a bond with the following features: Maturity = 7 years Face value = $1,000 Coupon rate = 4% Semiannual coupons Price = $993 What is this bond's YTM stated as an annual rate? A 3.2500% B 4.1161% C 2.0581% D 6.500%
A bond pays an annual coupon on a face value of $1,000. The bond is currently...
A bond pays an annual coupon on a face value of $1,000. The bond is currently trading at $950 and its yield is 7%. I buy the bond today and sell it immediately after I receive the next coupon one year from now, at which time its yield is still 7%. If my capital gain is 5%, then what is the bond's coupon rate?
PRICING ZERO COUPON BONDS - (a) Calculate the price of a zero coupon, $1,000 face value,...
PRICING ZERO COUPON BONDS - (a) Calculate the price of a zero coupon, $1,000 face value, 5-year bond if the appropriate annual discount rate is 12 percent. Calculate your total return if you hold this bond for three years and the discount rate does not change. (INCLUDE FORMULAS USED TO SOLVE PROBLEM IN EXCEL). EXPECTED RETURN ON T-BILLS - (b) What is the actual expected return on a US government 12-month, T-bill that is priced at $990, assuming its face...
If the $1,000 face value, 8% annual coupon bonds with 15 years remaining to maturity and...
If the $1,000 face value, 8% annual coupon bonds with 15 years remaining to maturity and a current market price of $1,150. $100 par value preferred stock that pays an 11% annual dividend and has a current market price of $92.Common stock with a current market price of $50/share. Investors expect the next annual dividend to be $4.00 and to grow after that at a constant rate of 7% per year into the foreseeable future. If new securities today: New...
17. Assume a semi-annual coupon bond matures in 3 years, has a face value of $1,000,...
17. Assume a semi-annual coupon bond matures in 3 years, has a face value of $1,000, a current market price of $989, and a 5 percent coupon. Which one of the following statements is correct concerning this bond? A. The current coupon rate is greater than 5 percent. B. The bond is a money market instrument. C. The bond will pay less annual interest now than when it was originally issued. D. The current yield exceeds the coupon rate. E....
A corporate bond has a $1,000 face value and a 5 percent coupon rate (annual payments)...
A corporate bond has a $1,000 face value and a 5 percent coupon rate (annual payments) maturing in 3 years. a. If the yield to maturity is 7%, what is the bond price? b. An investor believes an appropriate rate to discount the future cash flow of the bond should be 6%, should the investor buy or sell the bond? Discuss the reason(s).
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT