Preferred Stock Rate of ReturnWhat is the required rate of return on a preferred stock with a $50 par value, a stated annual dividend of 9% of par, and a current market price of (a) $68, (b) $86, (c) $110, and (d) $145 (assume the market is in equilibrium with the required return equal to the expected return)? Round the answers to two decimal places.     %     %     %     %

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Asked Sep 16, 2019

Preferred Stock Rate of Return

What is the required rate of return on a preferred stock with a $50 par value, a stated annual dividend of 9% of par, and a current market price of (a) $68, (b) $86, (c) $110, and (d) $145 (assume the market is in equilibrium with the required return equal to the expected return)? Round the answers to two decimal places.

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Expert Answer

Step 1

Calculation of d...

Calculation of dividend:
Dividend Par value x Rate
$50x 9%
$4.5
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Calculation of dividend: Dividend Par value x Rate $50x 9% $4.5

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