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the payments last forever. Preferred stocks are considered to be a hybrid of a common stock and a bond. For example, one of the majorences
the payments last forever. Preferred stocks are considered to be a hybrid of a common stock and a bond. For example, one of the majorences between preferred shares and bonds is that the issuing companies can suspend the payment of their prefered dividents company into bankruptcy. However, similar to bonds, preferred stockholders receive a fixed payment-their dividend-before the company's residual earnings are paid out to its common stockholders and, as with common stock, preferred stockholders can benefit from an appreciation in the value of the firm's stock securities. Consider the following case of International Imports (I2): International Imports (I2) pays an annual dividend rate of 10.40% on its preferred stock that currently returns 13.94% and has a par $100.00 per share. What is the value of I2's preferred stock? $74.61 per share $111.91 per share $100.00 per share $89.53 per share Suppose that due to high inflation, interest rates rise and pull the preferred stock's yield to 18.12%. The value of the preferred stock will
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