Alabama Power Has Preferred Stock That Pays an Annual Dividend

question 68

Multiple Choice

Alabama Power has preferred stock that pays an annual dividend of $9.44. If the security has no maturity, what is its value to an investor who wishes to obtain a 9 percent rate of return?

• A) $84.96
• B) $104.89
• C) $95.34
• D) $94.40

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Definitions:

Expected Revenue

The predicted amount of money that a business will receive from its sales over a certain period, usually calculated by multiplying expected sales by the price of goods or services.

Probability

A numerical representation between 0 and 1 that indicates the likelihood of an event transpiring.

Reservation Price

Reservation price is the maximum price a consumer is willing to pay for a product or service.

English Auction

A common auction format where the price starts low and is bid upward, with the highest bid at the end of the auction winning.