The First Bank of Ellicott City has issued perpetual preferred stock with a $100

Question

The First Bank of Ellicott City has issued perpetual preferred stock with a $100 par value. The bank pays a quarterly dividend of $1.65 on this stock. What is the current price of this preferred stock given a required rate of return of 12.5 percent? (Round answer to 2 decimal places, e.g. 15.25.)

Current price $ The First Bank of Ellicott City has issued perpetual preferred stock with a $100 par value. The bank pays a quarterly dividend of $1.65 on this stock. What is the current price of this preferred stock given a required rate of return of 12.5 percent? (Round answer to 2 decimal places, e.g. 15.25.)

Explanation / Answer

quarterly dividend = $ 1.65

1.65 * 4 = 6.60

Current Price = 6.6/0.125 = $52.80

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