North Pole Cruise Lines issued preferredstock many years ago. It carries a fixed dividend of $6 per share. With the passageof time, yields have soared from the original 6 percent to 14 percent (yield isthe same as required rate of return).
a. What wasthe original issue price?
b. What isthe current value of this preferred stock?
c. If the yield on the Standard & Poor's Preferred Stock Indexdeclines, how will the price of the preferred stock be affected?