This is all one question. Numbers 2 and 3 are related to number 1.

1. Big Oil, Inc. has a preferred stock outstanding that pays a $7 annual dividend. If investors' required rate of return is 10 percent, what is the market value of the shares? If the required return declines to 6 percent, what is the change in the price of the stock? 2. What should be the prices of the following preferred stocks if comparable securities yield 7 percent? Why are the valuations different? a. MN, Inc., $8 preferred ($100 par) b. CH, Inc., $8 preferred ($100 par) with mandatory retirement after 20 years 3. Repeat the previous problem but assume that comparable yields are 10 percent. In which case did the price of the stock change? In which case was the price more volatile