Carter's preferred stock pays a dividend of $1.00 per quarter.If the price of the stock is $50.00,what is its nominal (not effective) annual rate of return?

Question

Quizplus · Accepted Answer

The nominal annual rate of return is calculated by taking the annual dividend payment and dividing it by the price of the stock. In this case, the annual dividend is $1.00 per quarter, which totals $4.00 per year ($1.00 * 4). Dividing this by the price of the stock ($50.00) gives 0.08, or 8%.

Carter's Preferred Stock Pays a Dividend of $1