Question

If a share of preferred stock pays a quarterly dividelad of $1.50, has a $40 par value, and is currently selling for $50.00 it is earning an annual return of

1) 3.75%
2) 15.00%
3) 3.00
4) 12.00%

Answer 1

The preferred stock paying a quarterly dividend of $1.50 and selling for $50.00 earns an annual return of 12.00%.

Step-by-step explanation:

To calculate the annual return on the preferred stock, you need to first determine the total annual dividend payment and then divide it by the current selling price of the stock. The preferred stock pays a quarterly dividend of $1.50, which translates to $1.50 x 4 quarters = $6.00 per year. To determine the annual return, divide the annual dividend by the current selling price: $6.00 / $50.00 = 0.12, or a 12.00% annual return.

The annual return on the preferred stock can be calculated by dividing the annual dividend by the stock's current price. In this case, the annual dividend is $1.50 and the stock's current price is $50.00. Therefore, the annual return is $1.50 / $50.00 = 0.03, or 3%.To calculate the annual return on the preferred stock, you need to first determine the total annual dividend payment and then divide it by the current selling price of the stock. The preferred stock pays a quarterly dividend of $1.50, which translates to $1.50 x 4 quarters = $6.00 per year. To determine the annual return, divide the annual dividend by the current selling price: $6.00 / $50.00 = 0.12, or a 12.00% annual return.