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5 August, 17:24

A customer buys 1,000 shares of ABCD $25 par 8% cumulative preferred stock. This preferred issue pays quarterly dividends. This year, it missed the first 3 quarterly dividends. In the 4th quarter, it paid a common dividend of $.25 per share. In order to do this, it must have paid this preferred shareholder: A $400 B $500 C $1,600 D $2,000

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  1. 5 August, 19:01
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    D $2,000

    Explanation:

    Valueof Preffered stock = 1000 x 25 = $25,000

    Quartely dividend = 25000 x 8% x 3/12 = $500

    Dividend of four quarters = $500 x 4 = $2,000

    First three quarters has been missed so the preferred dividend of $2,000must be paid first from the declared dividend of 0.25 per share.

    So, the correct option is D $2,000.
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