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).055
B).010
C).110
D).220

Question

Quizplus · Accepted Answer

The rate of return on investment is calculated using the formula:

Rate of return = Annual dividend / Cost of investment

In this case, the annual dividend is $5.50 and the cost of investment is $50. Therefore, the rate of return is:

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

Therefore, the best choice is C).110.

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