Question

The preferred stock of Marble Comics currently sells for $31.25 per share. The annual dividend of $2.50 is fixed. Assuming a constant dividend forever, what is the rate of return on this stock? 9.5% 6.0% 4.5% 12.5% 8.0%

Answer 1

The rate of return on this stock is 8.0%.

Step-by-step explanation:

To calculate the rate of return on a stock, we need to divide the annual dividend by the current stock price. In this case, the annual dividend is $2.50 and the current stock price is $31.25. So the rate of return is $2.50 / $31.25 = 0.08 or 8%. Therefore, the correct answer is 8.0%.