RE:Example for WheeloffortuneWhere's the link that BPO Pref have a face value of $100? I'm finding series P with a face value of $25, so your calculation is wrong https://www.preferredstockchannel.com/symbol/bpo.prp.ca/
The 5 year BofC benchmark as of 6/20 is 3.69% https://www.bankofcanada.ca/rates/interest-rates/canadian-bonds/
If the premium is 1% (as you suggested).
Then, 3.69% + 1% = 4.69%
$25 x 4.69% = $1.17 per year.
Series P is trading at $10.83
$10.83 / $1.17 = 9.25% ( per year )
At 6%, it's $1.67 per year & 15.4% (per year), but it's highly doubtful the 5 year BofC benchmark would hit 6% with the kind of deficits the Canadian Gov't is running and the EU being lower at 2.91% right now. I think we're at the ceiling of how high the BofC can raise the interest rate without forcing an election. A lot of analysts suggest the interest rates will remain at 3.75% this year and come down to 2.75% by the end of 2025. https://wowa.ca/interest-rate-forecast
If it does come down, I'm sure your BPO Pref trading price will also fall.
CrazyTrader wrote: Company issue Preferred share with face value of $100. Company will pay dividends at a rate equal to 1% plus the 5 year Canadian Bond Rate. Shares reset every 5 years. Say right now 5yr rate is 3%.
So total rate will be 1+3=4% per year
So Company will pay Dividend of 4% of $100. which is $4 per year or $1 per quarter until next reset.
Now if I buy the shares for $25 and still get paid $4 per year, what's my yield Wheeloffortune?
Now if the 5 yr rate goes to 6%, what will be my yield?
I will see if you can answer these 2 question in this example before calculating it out.