Rose Has Preferred Stock Selling for 99 Percent of Par

question 31

Multiple Choice

Rose has preferred stock selling for 99 percent of par that pays a 9 percent annual coupon. What would be Rose's component cost of preferred stock?

• A) 4.55 percent
• B) 8.91 percent
• C) 9.00 percent
• D) 9.09 percent

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Definitions:

Economic Profit

The difference between a firm's total revenues and its total costs, including both explicit and implicit costs, measured in terms of opportunity costs.

Long Run

A period in economics where all factors of production and costs are variable, allowing full adjustment to changes.

Demand Curve

A diagram that illustrates the connection between a product's price and the amount of the product that buyers are prepared and capable of buying at different price levels.

Economic Profit

The difference between the total revenue earned by a business and the total costs (both explicit and implicit) of all resources used.