Problem 14-03
What should be the prices of the following preferred stocks if comparable securities yield 6 percent? Use Appendix B and Appendix D to answer the questions. Round your answers to the nearest cent.
MN, Inc., $5 preferred ($120 par)
$
CH, Inc., $5 preferred ($120 par) with mandatory retirement after 15 years
$
What should be the prices of the following preferred stocks if comparable securities yield 12 percent? Round your answers to the nearest cent.
MN, Inc., $5 preferred ($120 par)
$
CH, Inc., $5 preferred ($120 par) with mandatory retirement after 15 years
$
In which case did the price of the stock change?
As with the valuation of bonds, an increase in interest rates causes the value of preferred stock to -Select-fallriseItem 5 .
In which case was the price more volatile?
While the prices of both preferred stocks -Select-declinedincreasedItem 6 , the price of the -Select-perpetual preferred stockstock with mandatory retirementItem 7 was more volatile.
Interest Factors for the Present Value of One Dollar Time Period (e.g. year) 1 4% 7% NM 1% .990 980 971 .961 951 2% 3% 5% .980 971 1962 952 1961 943 925 907 1942 .915 .889864 924 889 855 .823 .906 863 822 .784 6% 943 .935 .890 .873 .840.816 .792 .763 .747 .713 8% 1926 .857 .794 .735 .681 9% 917 .842 .772 .708 .650 10% 12% 14% 15% 16% 909.893 .877 870 .862 .826 .797 .769 .756 .743 .751 .712 .675 .658 .641 .683 636 592 .572 .552 .621 567 519 497 476 18% .847 .718 .609 .516 437 20% .833 .694 .579 482 402 24% .806 .650 .524 423 341 28% .781 .610 477 .373 291 4 5 .432 6 7 8 9 10 942 933 923 914 905 .888 838 790 .746 .705.666 630 .871 .813 .760 .711 .665.623 583 .853 .789 .731 677 627 582 .540 .837 .766 .703 645 592 544 .500 .820 .744 676 614 558 508 463 596 -547 -502 460 .422 .564 507 .513 452 467 .404 424 361 .386 .322 456 .410 .370 .335 400 376 .354 314 .279 351 327 305 266 233 .308 .284 .263 226 194 .270 247 .227 191 .162 .275 .222 .179 .144 .116 .227 .178 .139 .108 .085 11 12 13 .896 .887 .879 .870 .861 .804 .788 .773 .758 .743 .722 .701 .681 .661 .642 .650 .625 .601 .577 .555 .585 .557 .530 .505 .481 .527 .497 469 .442 .417 475 .444 415 388 .362 .429 .388 .397 .356 368 326 .340 .299 .315 .275 .350 .319 .290 .263 .239 .287 .257 .229 .205 .183 .237 .208 .182 .160 .140 .215 .187 .163 .141 .123 .195 162 .168 .137 .145 .116 .125 .099 .108 .084 .135 .112 .093 .078 .065 .094 .076 .061 .049 .040 .066 .052 .040 .032 .025 16 17 18 19 20 .853 .844 .836 .828 .820 .728 .714 .700 .686 .673 .623 .605 .587 .570 .554 .534 .513 1494 475 456 .458 436 416 .396 377 .394 .371 350 .331 312 339 .317 .296 .276 .258 .292 .270 .250 .232 .215 .252 .231 .212 .194 .178 .218 .198 .180 .164 .149 .163 .146 .130 .116 .104 .123 .107.093 071 .054 .032 .019 .108.093 .080 .060 .045 .026 .015 .095 .081 069 .051 038 021 .012 .083 .070 ,060 .043 031 .017 .009 .073 .061 .051 037 .026 .014 .007 25 .780 .610 478 .375 .295 .233 .184 .146 .116 .092 .059 .038 .030 .024 .016 .010 .005 .002 30 .742 552 412 308 .231 .174 .131 .099 .075 .057 033 .020 .015 .012 .007.004 .002 .001 Interest Factors for the Present Value of an Annuity of One Dollar Time Period (e.g., year) 1 2 3 4 5 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 14% 16% 18% 20% 24% 28% 32% 36% 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.893 0.877 0.862 0.847 0.833 0.806 0.781 0.758 0.735 1.970 1.942 1.913 1.886 1.859 1.833 1.808 1.783 1.759 1.736 1.690 1.647 1.605 1.566 1.528 1.457 1.392 1.332 1.276 2.941 2.884 2.829 2.775 2.723 2.673 2.624 2.577 2.531 2.487 2.402 2.322 2.246 2.174 2.106 1.981 1.868 1.766 1.674 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.037 2.914 2.798 2.690 2.589 2.404 2.241 2.096 1.966 4.853 4.713 4.580 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.605 3.433 3.274 3.127 2.991 2.745 2.532 2.345 2.181 6 5.795 5.601 5.417 5.242 5.076 4.917 4.766 4.623 4.486 4.355 4.111 3.889 3.685 3.498 3.326 3.020 2.759 2.534 2.399 7 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 5.033 4.868 4.564 4.288 4.039 3.812 3.605 3.242 2.937 2.678 2.455 8 7.652 7.325 7.020 6.733 6.463 6.210 5.971 5.747 5.535 5.335 4.968 4.639 4.344 4.078 3.837 3.421 3.076 2.786 2.540 9 8.566 8.162 7.786 7.435 7.108 6.802 6.515 6.247 5.985 5.759 5.328 4.946 4.607 4.303 4.031 3.566 3.184 2.868 2.603 10 9.471 8.983 8.530 8.111 7.722 7.360 7.024 6.710 6.418 6.145 5.650 5.216 4.833 4.494 4.193 3.682 3.269 2.930 2.650 11 10.368 9.787 9.253 8.760 8.306 7.887 7.499 7.139 6.805 6.495 5.988 5.453 5.029 4.656 4.327 3.776 3.335 2.978 2.683 12 11.255 10.575 9.954 9.385 8.863 8.384 7.943 7.536 7.161 6.814 6.194 5.660 5.197 4.793 4.439 3.851 3.387 3.013 2.708 13 2.134 11.348 10.635 9.986 9.394 8.534 8.358 7.904 7.487 7.103 6.424 5.842 5.342 4.910 4.533 3.912 3.427 3.040 2.727 14 13.004 12.106 11.296 10.563 9.899 9.295 8.745 8.244 7.786 7.367 6.628 6.002 5.468 5.008 4.611 3.962 3.459 3.061 2.740 15 13.865 12.849 11.938 11.118 10.380 9.712 9.108 8.559 8.060 7.606 6.811 6.142 5.575 5.092 4.675 4.001 3.483 3.076 2.750 16 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.312 7.824 6.974 6.265 5.669 5.162 4.730 4.003 3.503 3.088 2.758 17 15.562 14.292 13.166 12.166 11.274 10.477 9.763 9.122 8.544 8.002 7.120 6.373 5.749 5.222 4.775 4.059 3.518 3.097 2.76 18 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.756 8.2017.250 6.467 5.818 5.273 4.812 4.080 3.529 3.104 2.767 19 17.226 15.678 14.324 13.134 12.085 11.158 10.336 9.604 8.950 8.365 7.366 6.550 5.877 5.316 4.844 4.097 3.539 3.109 2.770 20 18.046 16.351 14.877 13.590 12.462 11.470 10.594 9.818 9.128 8.514 7.469 6.623 5.929 5.353 4.870 4.110 3.546 3.113 2.772 25 22.023 19.523 17.413 15.622 14.094 12.783 11.654 10.675 9.823 9.077 7.843 6.873 6.097 5.467 4.948 4.147 3.564 3.122 2.776 30 25.808 22.937 19.600 17.292 15.373 13.765 12.409 11.258 10.274 9.427 8.055 7.003 6.177 5.517 4.979 4.160 3.569 3.124 2.778
