Question

What will be the nominal rate of return on a perpetual preferred stock with a $100 par value, a stated dividend of 10% of par

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Answer #1

Dividend = par value* dividend rate

Dividend = 100*10%

Dividend = 10

a.

Nominal rate = dividend / market price

Nominal rate = 10/68

Nominal rate = 14.71%

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b.

Nominal rate = dividend / market price

Nominal rate = 10/89

Nominal rate = 11.24%

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c.

Nominal rate = dividend / market price

Nominal rate = 10/96

Nominal rate = 10.42%

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d.

Nominal rate = dividend / market price

Nominal rate = 10/138

Nominal rate = 7.25%

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