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    Preferred Stock Value

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    There is a fixed dividend of $6 per share. With the passage of time, yields have soared from the original 6% to 14%:

    What was the original issue price?

    What is the current value of this preferred stock?

    If the yield on the Standard & Poor's Preferred Stock Index declines, how will the price of the preferred stock be affected?

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    Solution Preview

    What was the original issue price?

    The preferred stock is a perpetuity and so the yield on a preferred stock is given as Dividend Amount/Price.
    The original yield at the time of issue as 6%. The dividend amount is $6. We ...

    Solution Summary

    The solution explains how to calculate the price of a preferred stock.