Holdup Bank has an issue of preferred stock with a $4.75 stated dividend that ju

Question

Holdup Bank has an issue of preferred stock with a $4.75 stated dividend that just sold for $84 per share. What is the bank’s cost of preferred stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

  Cost of preferred stock

%

Holdup Bank has an issue of preferred stock with a $4.75 stated dividend that just sold for $84 per share. What is the bank’s cost of preferred stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Explanation / Answer

=D/kp

P= current Price=$84

D=Dividend=$4.75

Kp= Cost of preferred stock=?

84=4.75/kp

Kp=4.75/84

Kp=0.05655

Or 5.65%

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