#8

Preferred Stock Valuation

Several years ago, Rolen Riders issued preferred stock with a stated annual dividend of 11% of its $100 par value. Preferred stock of this type currently yields 9%. Assume dividends are paid annually.

1. What is the estimated value of Rolen's preferred stock? Round your answer to the nearest cent.

   $

2. Suppose interest rate levels have risen to the point where the preferred stock now yields 15%. What would be the new estimated value of Rolen's preferred stock? Round your answer to the nearest cent.

   $