Question

Ten years ago, stigler company issued $100 par value preferred stock yielding 6%. the preferred stock is now selling for $102 per share. what is the approximate current yield or cost of the preferred stock? (disregard flotation costs.)

Answer 1

To solve for the current yield, we must do the following steps:

1.       Get the interest of the preferred stock.

100 x 0.06 = 6

2.       Now if you get the interest, divide this by the amount of the current selling price of the stock.

6 / 102 = 0.0588

3.       Just convert this into percentage.

0.0588 x 100 = 5.9%