LTM, Inc. has an issue of preferred stock whose par value is $100. The preferred stock pays a 4.5% dividend. If investors require a 4% rate of return for these shares, what price should the preferred stock sell for? O $98.37 $136.35 O $112.50 O $118.05 4

LTM, Inc. has an issue of preferred stock whose par value is $100. The preferred stock pays a 4.5% dividend. If investors require a 4% rate of return for these shares, what price should the preferred stock sell for? O $98.37 $136.35 O $112.50 O $118.05 4

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 21MC

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Concept explainers

Stock Yields

The stock yield is otherwise known as the dividend yield. The dividend yield is an annual payment of the stock dividends to the holder of a firm’s stock. The dividend yield is a financial ratio to measure the value of dividend payout every year for the relative stock price. The yield of a stock is usually shown in a percentage that discloses the expected future earnings from stock depending on the current stock price in the future. Stock yield will change depending on the market fluctuations and in accordance with the market fluctuations, the dividends will be increased or decreased by the firm.

Question

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LTM, Inc. has an issue of preferred stock whose par value is $100. The preferred stock pays a
4.5% dividend. If investors require a 4% rate of return for these shares, what price should the
preferred stock sell for?
O $98.37
$136.35
O $112.50
O $118.05

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