6. Problem 9.07 (Preferred Stock Rate of Return) eBook What will be the nominal rate of...

Question

Question

Answer 1

Answer #1

Dividend rate = 11%

Par value = $100

Preferred Dividend = $100 * 11% = $11

Nominal rate of return = Preferred dividend / Current market price

a) Current market price = $52

Nominal rate of return = $11 / $52 = 0.2115 or

Nominal rate of return = 21.15%

b) Current market price = $80

Nominal rate of return = $11 / $80 = 0.1375 or

Nominal rate of return = 13.75%

c) Current market price = $99

Nominal rate of return = $11 / $99 = 0.1111 or

Nominal rate of return = 11.11%

d) Current market price = $131

Nominal rate of return = $11 / $131 = 0.0840 or

Nominal rate of return = 8.40%

Answer 2

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