Question

An 8 percent preferred stock with a market price of $110 per share and a $100 par value pays a cash dividend of ________. A) $4.00 B) $8.00 C) $8.80 D) $80.00

Answer 1

A) $4.00
The formula to calculate the cash dividends for a preferred stock is dividend rate x par value. An 8 percent preferred stock has a dividend rate of 8/100 = 0.08. So the cash dividend for a $100 par value is 0.08 x $100 = $8.00.
However, it is important to note that this is the cash dividends per share, not the market price per share.