- 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

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**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

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**User Contributed Comments**
1

User |
Comment |
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mc25456 |
r=6.75/75.62 |