Find what would be the value of rolen preferred stock

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The firm has a bond issue outstanding with 15 years remaining to maturity and a coupon rate of 8% (paid semi-annually). The required (current) rate has now risen to an effective annual yield of 16.64%.

Rolen Riders issued preferred stock with a stated dividend of 6% of par. Preferred stock of this type currently yields 7%, and the par value is $25. Assume dividends are paid annually.

Problem 1: Suppose interest rate levels rise to the point where the preferred stock now yields 9%. What would be the value of Rolen's preferred stock?

Reference no: EM132762996

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