(Preferred stock expected return) You are considering the purchase of 100 shares of preferred stock. Your...

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(Preferred stock expected return) You are considering the purchase of 100 shares of preferred stock. Your required return is

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Answer 1

Answer #1

Expected rate of Return of stock = Dividend/Current Selling Price*100

Dividend = 4

Current Selling Price = 31

Expected rate of Return of stock = 4/31*100 = 12.90%

Answer for option “a” = 12.90%

Answer for option “b”

If you have a required rate of return of 15%, you should not purchase the stock because the stocks expected rate of return is less than your required rate of return

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Answer 2

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