Fern Has Preferred Stock Selling for 95 Percent of Par

question 79

Multiple Choice

Fern has preferred stock selling for 95 percent of par that pays an 8 percent annual coupon. What would be Fern's component cost of preferred stock?

• A) 7.60 percent
• B) 8.00 percent
• C) 8.42 percent
• D) 9.00 percent

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Definitions:

Intended Beneficiary

An intended beneficiary is a person or entity that a contract explicitly states will benefit from its execution or terms.

Incidental Beneficiary

A third party who benefits from a contract between two other parties, although the benefit was not the reason the contract was formed and does not have rights to enforce the contract terms.

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Statute of Frauds

A law requiring certain types of contracts to be written and signed to be legally enforceable.