The return on the preferred stock, Finance Basics

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BAC is considering an issue of preferred stock. The dividends are 8.12% of the $25 par value.

a. If the present price is $26.25 per share, what is the return on the preferred stock?

b. Assume the preferred stock will mature in 20 years. If the price is $26.25 per share, what is the return on the preferred stock? HINT: This is just like a bond, but the face value is 25. For the problem, you can suppose the dividends are annual.

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