A share of preferred stock pays a dividend of $0.50 each quarter.If you are willing to pay $20.00 for this preferred stock,what is your simple (not effective)annual rate of return?
A) 10%
B) 8%
C) 6%
D) 12%
E) 14%

Question

Quizplus · Accepted Answer

The annual dividend is $0.50 per quarter * 4 quarters = $2.00 per year. The rate of return is calculated as (Annual Dividend / Price Paid) * 100 = ($2.00 / $20.00) * 100 = 10%.

A Share of Preferred Stock Pays a Dividend of $0