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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Answers (1)
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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