CFA Practice Question

There are 96 practice questions for this study session.

CFA Practice Question

Estimate the value of a fixed rate perpetual preferred stock with a $100 par value, a $15 dividend per annum, and a 12% required rate of return.
Correct Answer: Value = dividend / required rate of return = $15/0.12 = $125.

User Contributed Comments 5

User Comment
danlan2 Par value does not matter.
ostrich It could matter for impairment tests as well as issue of warrants, options, etc.
ljamieson It could, but it doesn't.
ashish100 It doesn't, but it could.
UcheSam For this question, it doesn't.
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