A share of preferred stock is selling today for $20.00. The share has a par value...

A share of preferred stock is selling today for $20.00. The share has a par value of $100 and an APR coupon rate of 4.75%. Based on this information, what is the required return to hold a share of preferred stock?

Question 4 options: 28.75% 23.75% 26.25% 21.25%

Expert Solution

Required return = Annual dividend / Selling price

Required return = ($100 * 0.0475) / $20.00

Required return = 0.2375 or 23.75%

jeff jeffy answered 2 years ago

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