Answer: €6.62

The correct answer is **A (€6.62)**. To calculate the semi-annual dividend, we use the formula for the intrinsic value of a preferred stock: \[ V_0 = \sum_{t=1}^{n} \frac{D}{(1 + r)^t} + \frac{F}{(1 + r)^n} \] Where: - \( V_0 \) = Intrinsic value (€125) - \( F \) = Par value per share (€100) - \( r \) = Semi-annual required rate of return (7.2% annual rate divided by 2 = 3.6%) - \( n \) = Number of semi-annual periods (5 years × 2 = 10) Solving for \( D \) (the semi-annual dividend), we arrive at approximately €6.62. **Option B (€7.20)** is incorrect because it mistakenly applies the annual required rate of return (7.2%) directly to the par value (€100), resulting in an annual dividend of €7.20, not the semi-annual dividend. **Option C (€9.00)** is incorrect because it applies the annual required rate of return (7.2%) to the intrinsic value (€125), resulting in an annual dividend of €9.00, which is not the semi-annual dividend.

Author: LeetQuiz Editorial Team