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April 18, 2014

Homework Help: STOCKS & BONDS

Posted by Yinka on Thursday, November 15, 2012 at 10:20am.

Alpha Corporation has outstanding an issue of preferred stock with a par value of $100. It pays an annual dividend equal to 8 percent of par value. If the required return on Alpha’s preferred stock is 6 percent, and if Alpha pays its next dividend in one year, what is the market price of the preferred stock today? Explain why the price would change, if the required rate increased to 10 percent.

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