Preferred Shares Current Yield Calculation

Preferred shares are a unique equity instrument that combines characteristics of both equity and debt. Unlike common stock, preferred shares typically have a fixed dividend and a higher claim on assets in the event of liquidation. The dividends can be cumulative or non-cumulative, and they may also have a conversion feature into common shares.

Consider a scenario where an investor holds a preferred share that pays a fixed dividend of $5 annually. The share is currently priced at $80. What is the current yield of the preferred share, and how does it compare with other investment opportunities in the market?