Several years ago, Rolen Riders issued preferred stock with a stated annual dividend of 10% of its

Question:

Several years ago, Rolen Riders issued preferred stock with a stated annual of 10% of its $100 par value. Preferred stock of this type currently yields 8%. Assume dividends are paid annually.
a. What is the value of Rolen’s preferred stock?
b. Suppose interest rate levels have risen to the point where the preferred stock now yields 12%. What would be the new value of Rolen’s preferred stock?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...