1. Assume a share of a preferred stock with the following characteristics:

Par Value $100

Dividend Rate 4.5% per year

Payment Schedule semiannual

No maturity date

This preferred stock is for possible purchase. The required rate of return is 6% per year, compounded semiannually.

a. Draw a timeline showing the expected dividends for this preferred stock

b. What is the value of this preferred stock based on the required rate of return?

c. If the current market price for this preferred stock is $71 per share, what is the expected return based on the market price?

d. Referring to the results from part b and c, Would it be wise to invest in this stock? why or why not?