Ask Question
24 August, 12:01

Fern has preferred stock selling for 93.5 percent of par that pays an 9.5 percent annual coupon. What would be Fern's component cost of preferred stock?

+2
Answers (1)
  1. 24 August, 14:32
    0
    10.16%

    Explanation:

    The computation of the cost of preferred stock is shown below:

    Cost of preferred stock = Annual coupon : Selling Price of preferred stock per share

    = $95 : $935

    = 10.16%

    The annual coupon would be

    = Par value * coupon percent

    = $1,000 * 9.5%

    = $95

    And, the selling price would be

    = Par value * selling percent

    = $1,000 * 93.5%

    = $935

    We assume the par value is $1,000

    Simply we divide the annual coupon by the selling price of preferred stock per share so that the correct cost of preferred stock can be determined
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Fern has preferred stock selling for 93.5 percent of par that pays an 9.5 percent annual coupon. What would be Fern's component cost of ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers