Hailey Transmission has two classes of preferred stock: floating-rate preferred stock and straight (normal) preferred stock. Both

Question:

Hailey Transmission has two classes of preferred stock: floating-rate preferred stock and straight (normal) preferred stock. Both issues have a par value of $100. The floating-rate preferred stock pays an annual dividend yield of 7 percent, and the straight preferred stock pays 8 percent. Since the issuance of the two securities, interest rates have gone up by 3 percent for each issue. Both securities will pay their year-end dividend today.
a. What is the price of the floating-rate preferred stock likely to be?
b. What is the price of the straight preferred stock likely to be?

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... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...

Fantastic news! We've Found the answer you've been seeking!