Question

the preferred stock of animal corp. pays a dividend of $1.50 per share. if animal preferred stock currently sells for $10 per share, the required rate of return is:

Answer 1

Preferred stock is 15%

Step-by-step explanation:

To calculate the required rate of return for preferred stock, we can use the following formula:

Required rate of return = Dividend per share / Market price per share

Required rate of return = $1.50 per share / $10 per share

Required rate of return = 15%

Therefore, the required rate of return for Animal Corp. preferred stock is 15%.

This means that investors expect to earn a 15% return on their investment in Animal Corp. preferred stock. If the stock is selling for less than 15%, investors will buy it until the price goes up. If the stock is selling for more than 15%, investors will sell it until the price goes down.