Jones Design wishes to estimate the value of its outstanding preferred stock. The preferred issue has a par value of ​$60 and pays an annual dividend of ​$5.60 per share. ​ Similar-risk preferred stocks are currently earning an annual rate of return of 7.1​%.   a.  What is the market value of the outstanding preferred​ stock? b.  If an investor purchases the preferred stock at the value calculated in part a​, how much does she gain or lose per share if she sells the stock when the required return on​ similar-risk preferred sto

Essentials Of Investments
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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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 Jones Design wishes to estimate the value of its outstanding preferred stock. The preferred issue has a par value of
​$60
and pays an annual dividend of
​$5.60
per share. ​ Similar-risk preferred stocks are currently earning an annual rate of return of
7.1​%.
 
a.  What is the market value of the outstanding preferred​ stock?
b.  If an investor purchases the preferred stock at the value calculated in part
a​,
how much does she gain or lose per share if she sells the stock when the required return on​ similar-risk preferred stocks has risen to
8.6​%?
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