How to find interest rate?

[ancheezy]

I have a long capital budgeting question that I need to work out, but I am stuck on how to find the interest rate. I don't know what numbers to use and how to use them.

Sell preferred stock @ $39.88. Par value $1.00
Last dividend paid= .035 cents per share.

Thanks for the help.

 

[DrPhil]

I have a long capital budgeting question that I need to work out, but I am stuck on how to find the interest rate. I don't know what numbers to use and how to use them.

Sell preferred stock @ $39.88. Par value $1.00
Last dividend paid= .035 cents per share.

Thanks for the help.

Was that a quarterly dividend? If so, annualize it by multiplying by 4.
Did you write it with the decimal in the right place? Might it have been $0.035, or 3.5¢ per share?

Find the interest rate by dividing interest/cost.

 

[ancheezy]

Was that a quarterly dividend? If so, annualize it by multiplying by 4.
Did you write it with the decimal in the right place? Might it have been $0.035, or 3.5¢ per share?

Find the interest rate by dividing interest/cost.

It turns out I had the decimal in the wrong place. It was meant to be .35 cents this whole time! I appreciate your help.

 

[TutorIndia]

See this example

Calculating Interest: Principal, Rate and Time are Known


When you know the principal amount, the rate and the time. The amount of interest can be calculated by using the formula:I = PrtFor the above calculation, we have $4500.00 to invest (or to borrow) with a rate of 9.5% for a 6 year period of time.