North Pole Cruise Lines issued preferred stock many years ago.It carries a fixed dividend of $6 per share. With the passage of time, yields havesoared from the original 6 percent to 14 percent (yield is the same as requiredrate of return).
a. What was the original issue price?
b. What is the current value of this preferredstock?
c. If the yield on the Standard & Poor'sPreferred Stock Index declines, how will the price of the preferred stock be affected?