Finance

Several years ago, Macro Riders issued preferred stock with a stated annual dividend of 5% of its $600 par value. Preferred stock of this type currently yields 10%. Assume dividends are paid annually.

i)What is the estimated value of Macro’s preferred stock?

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ii)Suppose interest rate levels have risen to the point where the preferred stock now yields 14%. What would be the new estimated value of Macro’s preferred stock?