Question

What is the rate of return on a preferred stock that has a par value of $50, a market price of $46.50, and a dividend of $4.10?

a.8.20%
b.11.34%
c.8.82%
d.12.20%

Answer 1

The rate of return on the preferred stock is calculated by dividing the annual dividend by the market price and then multiplying by 100, resulting in an 8.82% return.

Step-by-step explanation:

The rate of return on a preferred stock can be calculated using the formula: Rate of Return = (Annual Dividend / Market Price) × 100. In this case, the annual dividend provided is $4.10, and the market price is $46.50. By substituting these values into the formula, we get Rate of Return = ($4.10 / $46.50) × 100, which gives us a rate of return of 8.82%.

The rate of return on a preferred stock is calculated by dividing the dividend by the market price of the stock. In this case, the dividend is $4.10 and the market price is $46.50. So, the rate of return is $4.10 / $46.50, which is approximately 0.0882 or 8.82%. Therefore, option c. 8.82% Therefore, the correct answer to the student's question is (c) 8.82%.