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Concept explainers
(a)
To compute: The nominal
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)
To compute: The nominal rate of return on a perpetual preferred stock with current market price of $80.
(c)
To compute: The nominal rate of return on a perpetual preferred stock with current market price of $100.
(d)
To compute: The nominal rate of return on a perpetual preferred stock with current market price of $140.
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Chapter 9 Solutions
Bundle: Fundamentals of Financial Management, 14th + MindTap Finance, 1 term (6 months) Printed Access Card
- What will be the nominal rate of return on a preferred stock with a $100 par value, a stated dividend of 8 percent of par and a current market price of $80.arrow_forwardWhat will be the nominal rate of return on a perpetual preferred stock with a $100 par value, a stated dividend of 11% of par, and a current market price of (a) $55.00, (b) $77.00, (c) $108.00, and (d) $133.00? Round your answers to two decimal places.arrow_forwardWhat is the rate of return on a preferred stock that has a par value of $50, a market price of $46.50, and a dividend of $4.10? a. 8.20% b. 11.34% c. 8.82% d. 12.20%arrow_forward
- What will be the nominal RoR on a perpetual preferred stock with a $100 par value, a stated dividend of 7% of par, and a current market price of (1) $60, (2) $83, (3) $99, and (4) $136?arrow_forwardPreferred 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. % % % %arrow_forwardWhat 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) $31, (b) $40, (c) $52, and (d) $74 (assume the market is in equilibrium with the required return equal to the expected return)? Do not round intermediate calculations. Round the answers to two decimal places.arrow_forward
- Perferred Stock Rate of Return. What is the normal rate of return on a peretual perferred stock with a $100.00 par value, A stated dividend of 10% of par, and a current market price of (a) $61.00 (b) $90.00 (c) $100.00, and (d) $138.00arrow_forwardA share of preferred stock has a par value of $100, an annual dividend of 2% and a current market price of $67. What is the rate of return on the preferred stock?arrow_forwardwhat are the two type parts of most stocks expected total return? if D1=$2.00, g= 6% and po $40.00, what are the stocks expected dividend yield, capital gains yield, and total expected return for the coming year?arrow_forward
- Stock X has the following data. Assuming the stock market is efficient and the stock is in equilibrium, which of the following statements is CORRECT? Expected dividend, D1 $3.00 Current Price, Po $50 Expected constant growth rate 6.0% O a. The stock's expected dividend yield is 5%. O b. The stock's expected dividend yield and growth rate are equal. O c. The stock's required return is 10%. O d. The stock's expected price 10 years from now is $100.00. O e. The stock's expected capital gains yield is 5%.arrow_forwardA stock has a market price of $33.45 and pays a $.95 dividend. What is the dividend yield?arrow_forwardGiven the following data, what is the stock's expected growth rate according to the Gordon model? Dividend per share just paid: $3 Current market price: $35 Required rate of return: .10 Assume the stock is priced in equilibrium. Select one: O a. 2.45% O b. 4.32% O c. 3.56% Od. 1.32% c = X FILEarrow_forward
- Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
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