What should be the prices of the following preferred stocks if comparable securities yield 4 percent? Use Appendix B and Appendix D to answer the questions. Round your answers to the nearest cent.
MN, Inc., $8 preferred ($120 par)
$
CH, Inc., $8 preferred ($120 par) with mandatory retirement after 7 years
$
What should be the prices of the following preferred stocks if comparable securities yield 8 percent? Round your answers to the nearest cent.
MN, Inc., $8 preferred ($120 par)
$
CH, Inc., $8 preferred ($120 par) with mandatory retirement after 7 years
$
In which case did the price of the stock change?
As with the valuation of bonds, an increase in interest rates causes the value of
In which case was the price more volatile?
While the prices of both preferred stocks -Select-declinedincreasedItem 6 , the price of the -Select-perpetual preferred stockstock with mandatory retirementItem 7 was more volatile.
Formulas to calculate the price of the preferred stock:
P = D/K
Where P is the price, D is the dividend & K is the required return
MN, Inc., $8 preferred ($120 par)
=8/4%
=200.00
CH, Inc., $8 preferred ($120 par) with mandatory retirement after 7 years
=7x6.733+120*0.731
=47.131 + 87.72
=$134.85
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