CFA CFA Level 1 Question of the Week – Equity

Question of the Week – Equity

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    • Avatar of AdaptPrepAdaptPrep
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        You are provided with the following information on a non-callable, non-convertible preferred stock:

        • Face value: $50
        • Annual dividend: $2.50
        • Maturity: Perpetual
        • Embedded options: None
        • Required rate of return: 6.25%

        The intrinsic value of this stock is closest to:

        • $40
        • $50
        • $60
      • Avatar of AdaptPrepAdaptPrep
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          The formula for a non-callable, non-convertible, preferred
          perpetual stock is:

          V0 = D0 / r = $2.50 / 6.25% = $40

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