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You are interested in buying Ohio Edison preferred stock, which is traded at $45.00 per share today. This preferred stock pays a perpetual annual dividend of $4.40 per share and has a par value of $30.00 per share. What rate of return do you expect to have by buying this preferred stock

Respuesta :

ajeigbeibraheem

Answer:

9.78%

Explanation:

Given that:

Current Trade  price per share =$45

Par value = $30.00

Annual dividend = $4.40

The rate of return of a preferred stock = [tex]\dfrac{Dividend}{ Current \ trade \ Price}[/tex]

The rate of return of a preferred stock = [tex]\dfrac{4.40}{45 }[/tex]

The rate of return of a preferred stock = 0.097777

The rate of return of a preferred stock = 9.7777%

The rate of return of a preferred stock [tex]\simeq[/tex] 9.78%

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