Chapter 9, Problem 7P

(a)

Summary Introduction

To compute: The nominal rate of return on a perpetual preferred stock with current market price of $60.

Nominal rate of Return:

Nominal rate is the rate that is mentioned with the concerned security or financial instrument. It determines the basic cost of finance without any compounding effect.

Perpetual Preferred Stock:

Perpetual preferred stock is a financial instrument for long term financial assistance required by the companies. A category of preferred stock that doesn’t have a maturity date and is available without any fixed tenure is called perpetual preferred stock.

(b)

Summary Introduction

To compute: The nominal rate of return on a perpetual preferred stock with current market price of $80.

(c)

Summary Introduction

To compute: The nominal rate of return on a perpetual preferred stock with current market price of $100.

(d)

Summary Introduction

To compute: The nominal rate of return on a perpetual preferred stock with current market price of $140.