Question

You bought a share of 7.4 percent preferred stock for $101.68 last year. The market price for your stock is now $108.42. What is your total return for last year

Answer 1

Step-by-step explanation:

To calculate the total return for your preferred stock investment, we need to consider both the dividend yield and the capital gain.

Dividend Yield:

The dividend yield is the percentage return you receive from the dividends paid by the stock. In this case, the preferred stock has a 7.4 percent dividend yield.

Dividend Yield = (Dividend / Initial Investment) * 100

Let's calculate the dividend:

Dividend = Dividend Yield * Initial Investment / 100

Dividend = 7.4% * $101.68 / 100

Next, calculate the capital gain:

Capital Gain = (Final Market Price - Initial Investment)

Now, we can calculate the total return by adding the dividend and the capital gain:

Total Return = Dividend + Capital Gain

Let's substitute the given values:

Dividend Yield = 7.4%

Initial Investment = $101.68

Final Market Price = $108.42

Dividend = 7.4% * $101.68 / 100

Capital Gain = $108.42 - $101.68

Total Return = Dividend + Capital Gain

Using a calculator, we can find the values and calculate the total return for last year.