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Fifth National Bank just issued some new preferred stock. The issue will pay an annual dividend of

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Fifth National Bank just issued some new preferred stock. The issue will pay an annual dividend of $6 in perpetuity, beginning 10 years from now. If the market requires a return of 4.6 percent on this investment, how much does a share of preferred stock cost today?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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The price of a share of preferred stock is the dividend payment divided by th...View the full answer


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Stocks (also known as equities) are securities that represent ownership in a company. They are issued by companies to raise capital, and when an individual buys stocks, they become a shareholder in that company. Investing in stocks can be a way for individuals to potentially earn a return on their investment through dividends and capital appreciation. However, investing in stocks also carries a level of risk, as the value of the stock can fluctuate based on various factors such as the financial performance of the company and general market conditions. For companies, issuing stocks can be a way to raise funds for growth and expansion. When a company goes public by issuing an initial public offering (IPO), it can raise significant capital by selling ownership stakes to the public. Companies can also issue additional stock offerings to raise additional capital as needed.

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