Question

You have been offered Synergy Inc.'s preferred stock at a price of $31.50. It pays a dividend of $4.41 per year. Calculate the return on the stock?

Answer 1

To calculate the return on Synergy Inc.'s preferred stock, the dividend yield is found by dividing the annual dividend of $4.41 by the stock price of $31.50, resulting in a return of 14%.

Step-by-step explanation:

To calculate the return on the preferred stock being offered by Synergy Inc., you need to use the dividend yield formula, which is the annual dividend per share divided by the price per share. In this case, Synergy Inc. pays a dividend of $4.41 per year, and the price of the stock is $31.50. So, the return on the stock (dividend yield) can be calculated as follows:

Return on Stock = Dividend Per Share / Price Per Share
= $4.41 / $31.50
= 0.14 or 14%

This percentage represents the return you would get on your investment in the stock based on the current dividend and stock price.