North Pole Cruise Lines issued preferred stock many years ago. It carries a fixed dividend of $12 per share. With the passage of time, yields have changed from the original 10 percent to 8 percent (yield is the same as required rate of return).

a. What was the original issue price? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Original issue price ________

b. What is the current value of this preferred stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Current Value_________

c. If the yield on the Standard & Poors Preferred Stock Index declines, how will the price of the preferred stock be affected? PICK ONE

• The price of preferred stock will increase.

• The price of preferred stock will decrease.