What is the fair market value of a perpetual preferred share just after the semi-annual dividend of $.60 has been paid if shares of similar risk are earning 7.25% compounded semi-annually?

Semi-annual dividend

A payment made to shareholders from a company's earnings, distributed twice a year.

Perpetual preferred share

A type of preferred stock that has no fixed maturity date, often providing dividends indefinitely.

Compounded semi-annually

The method of computing interest by taking into account both the original amount of money deposited or lent and the interest that has been earned on that amount from past periods, with the calculation occurring semi-annually.

Determine the worth of annuities and perpetuities, accounting for types such as ordinary annuities, annuities due, deferred annuities, and perpetuities across varied compounding intervals.
Utilize compound interest formulas to address issues regarding savings, loans, and investments.

Verified Answer

Molly BrownMay 20, 2024

Final Answer :

$8.28

Learning Objectives

Determine the worth of annuities and perpetuities, accounting for types such as ordinary annuities, annuities due, deferred annuities, and perpetuities across varied compounding intervals.
Utilize compound interest formulas to address issues regarding savings, loans, and investments.

What is the fair market value of a perpetual preferred share just after the semi-annual dividend of $.60 has been paid if shares of similar risk are earning 7.25% compounded semi-annually?

Definitions

Learning Objectives

Learning Objectives

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