Wernam Hogg Class a Preferred Shares Have a Par Value

question 93

Multiple Choice

Wernam Hogg Class A preferred shares have a par value of $100 and offer an annual dividend at 0.8% of par value.Wernham Hogg Class A Preferred shares paid their annual dividend yesterday and are currently priced at $16 to yield 5%.The central bank is threatening to tighten monetary policy.The chief economist predicts that all interest rates will rise by 2% over the coming year (the yield on the Wernham Hogg Class A Preferred shares will also rise to 7%) .If you sell your Wernham Hogg Class A Preferred shares in one year after the interest rate increase (and after the next dividend) ,then what return will you have earned on the investment assuming that you bought at today's price?

• A) -89.7%
• B) -28.6%
• C) -23.6%
• D) 5.0%
• E) 21.3%

---

Definitions:

Interest Rate

The percentage of the borrowed sum charged to the borrower as interest, generally represented as an annual rate of the total loan amount.

Antique Price

The market value or cost of an object that has historical significance or is considered collectible due to its age.

Interest Rate

The rate at which interest is either incurred or earned for borrowing or lending money during a specific time frame.

Investment Purposes

The intent behind putting money into financial schemes, shares, property, or a commercial venture, aiming for a future financial return.