Finance 問題 stock 急 20分

The frequency of paying dividends is crucial to most corporations. In general, quarterly dividends on stocks are usually paid instead of annual dividends. In order to manage the dividend policy effectively, the board of directors for ABC Co. reviews its current annual dividend policy and raises the following four proposals to its preferred stockholders. At present, ABC Co. pays a $12 annual dividend on its preferred stock. Assume that the required return on this preferred stock is 10%. The dividend is normally paid at the end of each period.

Proposal 1: the $1 dividend on its preferred stock is paid monthly
Proposal 2: the $3 dividend on its preferred stock is paid quarterly
Proposal 3: the $6 dividend on its preferred stock is paid semi-annually
Proposal 1: the $24 dividend on its preferred stock is paid bi-annually

(a)Describe the difference between APR and EAR.
(b)What is the current share price if ABC Co. maintains its present dividend policy?
(c)Analyze the price of ABC Co. preferred stock for the above 4 proposals, respectively.
(d)Discuss the relationship between the share price and the frequency of paying dividends.
(e)If you are the preferred stockholder, how could you recommend ABC Co. in terms of the dividend policy?