GE issued preferred stock that had a par value of $100. The preferred stock pays a dividend of 6.50%. Investors require 5.7% today on this stock. What is the value of the preferred stock today? Round to the nearest $1.

(A) $100
(B) $88
(C) $75
(D) $114

To calculate the value of the preferred stock today, we can use the dividend discount model (DDM) formula. The formula is as follows:

Value = Dividend / Required Rate of Return

Here, the dividend is the annual dividend payment, which is 6.50% of the par value of the preferred stock. The required rate of return is the rate at which investors require on this stock, which is given as 5.7%.

Let's calculate the value of the preferred stock:

Dividend = 6.50% x $100 = $6.50
Required Rate of Return = 5.7%

Value = $6.50 / 0.057 ≈ $114

Therefore, the value of the preferred stock today is approximately $114. The correct option is (D).