A Company Issues 100,000 Shares of Preferred Stock for $40

Multiple Choice

A company issues 100,000 shares of preferred stock for $40 a share. The stock has a fixed annual dividend rate of 5% and a par value of $3 per share. Preferred stockholders can anticipate receiving a dividend of:

A) $200,000 each year.
B) $15,000 each year.
C) 5% of net income each year.
D) 5% of the market value of the stock at the time the dividend is declared.