Problem 10-25 Preferred stock value [LO10-4]

X-Tech Company issued preferred stock many years ago. It carries a fixed dividend of $9 per share. With the passage of time, yields have changed from the original 15 percent to 18 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.)

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

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

multiple choice

• 1/ The price of preferred stock will increase.

• 2/ The price of preferred stock will decrease.