Century 21 preferred shares have a par value of $60 and are selling for $50.What is the required rate of return if the preferred shares pay an annual dividend of 6 percent?

Question

Quizplus · Accepted Answer

The required rate of return is calculated by dividing the annual dividend by the current price of the preferred shares. The annual dividend is 6% of the par value, which is $3.60 ($60 * 0.06). The required rate of return is $3.60 / $50 = 0.072 or 7.2%.

Century 21 Preferred Shares Have a Par Value of $60