Question: a. Given a preferred stock with an annual dividend of $3 per share and a price of $40, what is the required rate of return?

a. Given a preferred stock with an annual dividend of $3 per share and a price of $40, what is the required rate of return?

b. Assume now that interest rates rise, leading investors to demand a required rate of return of 9 percent. What will the new price of this preferred stock be?

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