You plan to pay $50 for a share of preferred stock that pays a $2.40 dividend per year forever.What annual rate of return will you realize?

Question

Quizplus · Accepted Answer

To calculate the rate of return, we need to divide the dividend by the price paid for the stock.

Rate of Return = Dividend / Price

Rate of Return = $2.40 / $50

Rate of Return = 4.8%

Therefore, the annual rate of return on this preferred stock is 4.8%, which is option C.

You Plan to Pay $50 for a Share of Preferred