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 14.0 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 14.0 percent? (Round answer to 2 decimal places, e.g. 15.25.)

Explanation / Answer

$1.65 x4 = $6.60
per the requirement the rate of return is 14.0%
.14 P = 6.60
P =6.60/.14 = $47.14
the par value of the stock has nothing to do with the current price.

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