Piercing Publishers Recently Issued Preferred Stock with a Fixed Annual

question 74

Multiple Choice

Piercing Publishers recently issued preferred stock with a fixed annual dividend of $3.00 per share. Investors require a 5% return on similar preferred stock issues. The stock is currently selling for $65. Is the stock a good buy?

• A) Yes, as it is undervalued $5.
• B) Yes, as it is undervalued $10.
• C) No, as it is overvalued $5.
• D) No, as it is overvalued $10.

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