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ZZZ has preferred shares outstanding. The current price of each preferred share is $100 and it...

ZZZ has preferred shares outstanding. The current price of each preferred share is $100 and it pays a dividend of $5 each year. What is the required rate of return on this stock, if the next dividend is going to be paid tomorrow? What if the most recent dividend was paid yesterday?

Solutions

Expert Solution

Required rate on preferred stock = Annual Dividend/Price

Required rate = 5/100

Required rate = 5.00%


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