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What will be the nominal rate of return on a perpetual preferredstock with a $100...

What will be the nominal rate of return on a perpetual preferred stock with a $100 par value, a stated dividend of 11% of par, and a current market price of (a) $52, (b) $83, (c) $98, and (d) $144? Round your answers to two decimal places.

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Expert Solution

Statement showing computation:

Rate of return= Dividend/current price

Dividend= 100*0.11= $11

a) Calculation of nominal return when price is $52

Return= 11/52= 0.2115

Return= 21.15%

b) Calculation of nominal return when price is $83

Return= 11/83= 0.1325

Return= 13.25%

c) Calculation of nominal return when price is $98

Return= 11/98= 0.1122

Return= 11.22%

d) calculation of nominal return when price is $144

Return= 11/144= 0.0764

Return= 7.64%

jeff jeffy answered 2 years ago
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