单选题

A company has issued non-callable, non-convertible preferred stock with the following features:
·Par value per share $10
·Annual dividend per share $2
·Maturity 15 years
If an investor's required rate of return is 8% and the current market price per share of the preferred stock is $25, the most likely conclusion is that the preferred stock is:

A、 overvalued by $4.73.
B、 fairly valued at $25.00.
C、 undervalued by $15.00.

【正确答案】 A

【答案解析】

A is correct. Using a financial calculator: FV = $10; n = 15; PMT = 2; r = 8%; Compute PV = $20.27.The preferred stock is overvalued by $4.73 (Market price of$25 - Estimated value of $20.27).