- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 2. Time Value of Money in Finance
- Subject 2. Fixed Income Instruments and the Time Value of Money
CFA Practice Question
A share of preferred stock pays a specific dividend on a specific schedule for as long as the issuing company exists. Assume that a share of preferred stock pays an annual per-share dividend of $6.75 at the end of each year. The present value of this share of preferred stock is $75.62. Assume that the company paying the dividends will exist forever. What interest rate or rate of return does this dividend and price represent?
A. 11.20%
B. 9.75%
C. 8.92%
Explanation: r = A/PV
User Contributed Comments 1
User | Comment |
---|---|
mc25456 | r=6.75/75.62 |