Billy's Goat Coats Has a Preferred Share Issue Outstanding with a Current

question 3

Multiple Choice

Billy's Goat Coats has a preferred share issue outstanding with a current price of $38.89. The firm last paid a dividend on the issue of $3.50 per share. What is the firm's cost of preferred equity? Round your final answer to nearest percentage.

• A) 7%
• B) 8%
• C) 9%
• D) 10%

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Definitions:

Unsystematic Risk

The risk associated with a specific issuer or sector, which can be mitigated through diversification.

International Securities

Financial instruments, such as stocks and bonds, that are traded on global markets and denominated in various currencies.

Unsystematic Risk

The risk associated with a specific company or industry, which can be mitigated through diversification in a portfolio.