› CFA › CFA Level 1 › Question of the Week – Equity

Question of the Week – Equity

Add A Reply
Login
  • Author
    Posts
    • Avatar of AdaptPrepAdaptPrep
      Participant
        • Undecided
        10 Jan 2018 at 11:04 am
        Up
        2
        ::

        You are provided with the following information on a non-callable, non-convertible preferred stock:

        • Face value: $50
        • Annual dividend: $2.50
        • Maturity: Perpetual
        • Embedded options: None
        • Required rate of return: 6.25%

        The intrinsic value of this stock is closest to:

        • $40
        • $50
        • $60
      • Avatar of AdaptPrepAdaptPrep
        Participant
          • Undecided
          13 Jan 2018 at 7:59 pm
          Up
          0
          ::

          The formula for a non-callable, non-convertible, preferred
          perpetual stock is:

          V0 = D0 / r = $2.50 / 6.25% = $40

      • Author
        Posts
      Viewing 1 reply thread
      • You must be logged in to reply to this topic.