A share of a preferred stock pays a dividend of $0.50 each quarter. If you are willing to pay $20.00 for this preferred stock, what is the simple (not effective) annual rate of return?

Name: A share of a preferred stock pays a dividend of $0.50 each quarter. If you are willing to pay $20.00 for this preferred stock, what is the simple (not effective) annual rate of return?
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Question

Quizplus · Accepted Answer

The annual dividend is $0.50 * 4 = $2.00. The annual rate of return is $2.00 / $20.00 = 0.10 or 10%.

A Share of a Preferred Stock Pays a Dividend of $0.50