Preferred stock pays annual dividend

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1. A preferred stock pays an annual dividend of $2.5. What is one share of this stock worth today if the rate of return is 12.25 percent? Show your work.

2. You buy an annuity that will pay you $32,000 a year for 20 years. The payments are paid on the first day of each year. What is the value of this annuity today if the discount rate is 9.75 percent? Show your work. (Hint: This is an annuity due problem. Remember to switch your financial calculator to BGN, then switch back to END after completing this problem.)

Reference no: EM131854566

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