The following preferred stocks are returning 10% to their owners: Stock Dividend
ID: 1175352 • Letter: T
Question
The following preferred stocks are returning 10% to their owners:
Stock Dividend % Current Price
A 6% $20.00
B 8% $50.00
C 10% $150.00
Calculate the prices at which they were issued.
Stock A:_________________________________________________________________
Stock B:_________________________________________________________________
Stock C:_________________________________________________________________
Please explain how to calculate the answers. Thank you
Explanation / Answer
Issue price = Current price x Return / Dividend rate
(Current price earns dividend hence it makes Return of 10% so if we divided the dividend rate with product of current price and return we would get Issue price)
.
Stock A:
Issue price = 20*10%/6% = $33.33
.
Stock B:
Issue price = 50*10%/8% = $62.50
.
Stock C:
Issue price = 150*10%/10% = $150.00
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