Holdup bank has an issue of preferred stock with a 8 stated, Financial Management

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Holdup bank has an issue of preferred stock with a 8 stated

Holdup Bank has an issue of preferred stock with a $8 stated dividend that just sold for $95 per share. What is the bank's cost of preferred stock?

Hint: The price of any asset is the present value of future cash flows. The preferred stock has a constant dividend, and is a perpetuity. Use the present value equation for a perpetuity to figure out the required return on the preferred stock.

8.00%

8.08%

8.76%

8.42%

8.84%

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Financial Management: Holdup bank has an issue of preferred stock with a 8 stated

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