Question

What will be the nominal rate of return on a perpetual preferred stock with a $100 par value, a stated dividend of 12% of par, and a current market price of (a) $56.00, (b) $76.00, (c) $116.00, and (d) $133.00? Round your answers to two decimal places. %

Answer 1

Given :

`\text{Preferred share par value = $30}`

Required :

`\text{Normal rate of return (rp)}`

Formula :

`\text{rp =} (Dp)/(Vp)`

Where,

`\text{Vp = price of preferred share}`

`\text{Dp = dividend per share}`

`\text{Rp = normal rate of return of preferred share}`

Solve for nomial rate of return (rp) :

Refer The Attachment