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Calculate the value of a preferred stock that pays an annual dividend of $5.50 if the current market yield on AAA rated preferred stock is

Calculate the value of a preferred stock that pays an annual dividend of $5.50 if the current market yield on AAA rated preferred stock is 75 basis points above the current T-Bond rate of 7%. (Hint: 75 basis points = 0.75%).

A. $42.63

B. $78.57

C. $70.97

The answer is B but why?

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