Problem:
North Pole Cruise Lines issued preferred stock many years ago.It carries a fixed dividend of $6 per share. With the passage of time, yields havesoared from the original 6 percent to 14 percent (yield is the same as requiredrate of return).
Required:
Question 1: What was the original issue price?
Question 2: What is the current value of this preferredstock?
Question 3: If the yield on the Standard & Poor'sPreferred Stock Index declines, how will the price of the preferred stock be affected?
Note: Please provide through step by step calculations.