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17 January, 22:54

What will be the nominal rate of return on a perpetual preferred stock with a $100 par value, a stated dividend of 9% of par, and a current market price of (a) $68, (b) $81, (c) $117, and (d) $134? Round your answers to two decimal places. a. b. C. d.

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  1. 18 January, 01:58
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    a. D = 9% x $100 = $9

    Par value = $100

    Po = $68

    Kp = D/Po

    Kp = $9/$68

    Kp = 0.1324 = 13.24%

    b. Kp = $9/$81

    Kp = 0.1111 = 11.11%

    c. Kp = $9/$117

    Kp = 0.0769 = 7.69%

    d. Kp = $9/$134

    Kp = 0.0672 = 6.72%

    Explanation: In this question, we need to determine the fixed dividend paid by multiplying the dividend rate (9%) by the par value ($100). Then, we will divide the fixed dividend by the current market price.
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Home » Business » What will be the nominal rate of return on a perpetual preferred stock with a $100 par value, a stated dividend of 9% of par, and a current market price of (a) $68, (b) $81, (c) $117, and (d) $134? Round your answers to two decimal places. a. b. C.
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