CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

BWT Inc. shows the following data in its financial statements at the end of the year. Assume all securities were outstanding at the beginning of the year.

  • 6.125% convertible bond, convertible into 33 shares of common stock. Issue price $1,000, 100 bonds outstanding.
  • 6.25% convertible preferred stock, $100 par, 2,315 shares outstanding. Convertible into 3.3 shares of common stock, issue price $100.
  • 8% convertible preferred stock, $100 par, 2,572 shares outstanding. Convertible into 5 common shares, issue price $80.
  • 9,986 warrants are outstanding with an exercise price of $38. Each warrant is convertible into 1 share of common stock.
  • Average market price of common stock is $52.00 per share.
  • Common shares outstanding at the beginning of the year were 40,045.
  • Net income for the period was $200,000 while the tax rate was 40%.

What were the preferred dividends paid this whole year?
A. $20,576
B. $14,469
C. $35,045
Explanation: (.0625)(100)(2315) = 14,469
(.08)(100)(2,572) = 20,576
14,469 + 20,576 = 35,045

User Contributed Comments 2

User Comment
desaii why do you not take into account the number of shares they are convertible into ??
Lamkerst because we calcute preferred dividends, not common dividends.
You need to log in first to add your comment.