Author Question: Wernam Hogg Class A preferred shares have a par value of $100 and offer an annual dividend at 0.8% ... (Read 123 times)

notis · **on:** Apr 25, 2021

Wernam Hogg Class A preferred shares have a par value of $100 and offer an annual dividend at 0.8% of par value. Wernam Hogg Class A Preferred shares paid their annual dividend yesterday and are currently priced at $16 to yield 5%.

The central bank is threatening to tighten monetary policy. The chief economist predicts that all interest rates will rise by 2% over the coming year (the yield on the Wernam Hogg Class A Preferred shares will also rise to 7%).

If you sell your Wernam Hogg Class A Preferred shares in one year after the interest rate increase (and after the next dividend), then what return will you have earned on the investment assuming that you bought at today's price?
◦ -89.7%
◦ -28.6%
◦ -23.6%
◦ 5.0%
◦ 21.3%

Kingjoffery · **Reply #1 on:** Apr 25, 2021

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