1.Annual dividend=100*10%=$10
Nominal rate of return=Annual dividend/Current value
a.Nominal rate of return=10/53=18.87%(Approx).
b.Nominal rate of return=10/88=11.36%(Approx).
c.Nominal rate of return=10/97=10.31%(Approx).
d.Nominal rate of return=10/137=7.30%(Approx).
2.
Current price=D1/(Required return-Growth rate)
=2.5/(0.13-0.03)
=$25
P3=Current price*(1+Growth rate)^3
=$25*(1.03)^3
=27.32(Approx).
What will be the nominal rate of return on a perpetual preferred stock with a $100...
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