Holdup Bank has an issue of preferred stock with a $4.95 stated dividend that just sold for $86 per share. What is the bank’s cost of preferred stock?

Holdup Bank has an issue of preferred stock with a $4.95 stated dividend that just sold for $86 per share. What is the bank’s cost of preferred stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Explanation:

The cost of preferred stock is the dividend payment divided by the price, so:

RP = $4.95/$86

RP = .0576, or 5.76%