Wild Berries Inc.'s 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 6.0%?

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Quizplus · Accepted Answer

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