PREFERRED STOCK RATE OF RETURN What will be the nominal rate of return on a per- petual preferred stock with a $100 par value, a stated dividend of 10% of par, and a current market price of (a) $61, (b) $90, (c) $100, and (d) $138?
PREFERRED STOCK RATE OF RETURN What will be the nominal rate of return on a per- petual preferred stock with a $100 par value, a stated dividend of 10% of par, and a current market price of (a) $61, (b) $90, (c) $100, and (d) $138?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Answer in excel format and explain formulas used.
![**Preferred Stock Rate of Return**
What will be the nominal rate of return on a perpetual preferred stock with a $100 par value, a stated dividend of 10% of par, and a current market price of:
- (a) $61
- (b) $90
- (c) $100
- (d) $138?
This exercise involves calculating the nominal rate of return for a preferred stock based on different market prices. The formula used for these calculations is:
\[ \text{Nominal Rate of Return} = \frac{\text{Annual Dividend}}{\text{Current Market Price}} \]
For this preferred stock, the annual dividend is 10% of the $100 par value, which amounts to $10. The nominal rate of return will be calculated for each given market price.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F96006375-1bc8-4104-8749-d47bd06085f4%2F11a71b43-c796-406a-83f9-dd8971a34c4f%2Fav9dtw_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Preferred Stock Rate of Return**
What will be the nominal rate of return on a perpetual preferred stock with a $100 par value, a stated dividend of 10% of par, and a current market price of:
- (a) $61
- (b) $90
- (c) $100
- (d) $138?
This exercise involves calculating the nominal rate of return for a preferred stock based on different market prices. The formula used for these calculations is:
\[ \text{Nominal Rate of Return} = \frac{\text{Annual Dividend}}{\text{Current Market Price}} \]
For this preferred stock, the annual dividend is 10% of the $100 par value, which amounts to $10. The nominal rate of return will be calculated for each given market price.
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