CFA Level 1 Exam

3959 Questions

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Question No. 1

Consider the following preferred stock:

Price per share: $12.55
Semiannual dividend per share: $0.725
Required return: 11.50% per year

Is the preferred stock realistically overvalued, undervalued, or correctly valued? Further, should this preferred stock be valued as a perpetuity or a finite series of cash flows? (Assume a long-term holding period).
Choose the correct option from the given list.
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