Answer:
Cost of preferred stock will be 5.78 %
Explanation:
We have given par value = $100
Dividend rate = 5.5 %
So annual dividend [tex]=\frac{100\times 5.5}{100}=$5.5[/tex]
We know that cost of preferred stock is given by [tex]=\frac{Annual\ dividend}{current\ price}[/tex]
Current price is given as $95.02
So cost of preferred stock will be = [tex]=\frac{Annual\ dividend}{current\ price}=\frac{5.5}{95.02}=0.0578=5.78[/tex] %
