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13 September, 19:10

Holdup Bank has an issue of preferred stock with a $6 stated dividend that just sold for $93 per share. What is the bank's cost of preferred stock

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  1. 13 September, 22:55
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    6.45%

    Explanation:

    Calculation for bank's cost of preferred stock

    Using this formula

    Cost of preferred stock = Dividend / Price of Stock * 100

    Where,

    Dividend $6

    Price of Stock 93 per share

    Let plug in the formula

    Cost of preferred stock = 6/93*100

    Cost of preferred stock = 0.0645*100

    Cost of preferred stock=6.45 %

    Therefore the bank's cost of preferred stock will be 6.45%
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