Jay Bond owns IJK 6 percent cumulative preferred stock ($100 Par Value). In his first year of ownership, IJK paid $3 in dividends. The the 2nd year, IJK paid $4 in dividends. In the 3rd year, a common dividend was declared. How much must Jay receive?

Explanations

Cumulative preferred stock owners are owed missed dividends. IJK missed $3 in year one and $2 in year two. When a common dividend is announced, they must make up for missed dividends to cumulative preferred shareholders. The dividend should be $6 (6% of 100 Par Value). $3+$2+6 = $11