What Is the Value of a Preferred Stock That Pays

question 55

Multiple Choice

What is the value of a preferred stock that pays a $4.50 dividend to an investor with a required rate of return of 10%?

• A) $22.22
• B) $27.83
• C) $45
• D) $55.50

---

Definitions:

Mutually Exclusive

Describes events that cannot occur at the same time, meaning the occurrence of one event excludes the possibility of the other event happening.

P(A ∩ B)

The probability of the intersection of events A and B, representing the likelihood that both events occur simultaneously.

P(A ∪ B)

Represents the probability of the occurrence of at least one of two events, A or B, including the case where both events occur simultaneously.

P(A ∩ B)

The probability that events A and B both occur, also known as the intersection of A and B.