You have just purchased a share of preferred stock for $50.00.The preferred stock pays an annual dividend of $5.50 per share forever.What is the rate of return on your investment?
A) 0.055
B) 0.010
C) 0.110
D) 0.220

Question

Quizplus · Accepted Answer

The rate of return on investment is calculated by dividing the annual dividend by the purchase price of the stock.

Rate of return = Annual dividend / Purchase price

In this case, the annual dividend is $5.50 and the purchase price of the stock is $50.

Rate of return = 5.50 / 50 = 0.11 or 11%

Therefore, the correct answer is C) 0.110.

You Have Just Purchased a Share of Preferred Stock for $50.00.The