Which of the Following Formulas Is Appropriate to Find the Value

question 8

Multiple Choice

Which of the following formulas is appropriate to find the value of preferred stock with a fixed dividend?

• A) Value of preferred stock = Annual Preferred Stock Dividend (1+ growth rate)/Market's Required Yield on Preferred Stock
• B) Value of preferred stock = Annual Preferred Stock Dividend (1+ growth rate)/Market's Required Yield on Preferred Stock - growth rate
• C) Value of preferred stock = Annual Preferred Stock Dividend/Market's Required Yield on Preferred Stock
• D) Value of preferred stock = Annual Preferred Stock Dividend/Investor's Required Yield on Preferred Stock

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Definitions:

Income

Money received, especially on a regular basis, for work or through investments.

Directly Related

A relationship between two variables in which they move in the same direction.

Consumer's Income

The sum of money a consumer can spend on products and services.

Budget Line

A visual depiction of every potential combination of two products that can be bought within a specific budget at fixed prices.