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Several years ago, Macro Riders issued preferred stock with a stated annual dividend of 5% of its $600 par value. Preferred stock of this type

Several years ago, Macro Riders issued preferred stock with a stated annual dividend of 5% of its $600 par value. Preferred stock of this type currently yields 10%. Assume dividends are paid annually.

  1. What is the estimated value of Macros preferred stock?
  2. Suppose interest rate levels have risen to the point where the preferred stock now yields 14%. What would be the new estimated value of Macros preferred stock?

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