The preferred stock of Acme International is selling currently at $110.35. If your required rate of return is 9.75 percent, what is the dividend paid by this stock? (Round off to the two decimal places.)

Question

Quizplus · Accepted Answer

We can use the formula for dividend yield to find the dividend paid:
Dividend Yield = Annual Dividend / Stock Price
Rearranging the formula, we get: Annual Dividend = Dividend Yield x Stock Price
Since the required rate of return is 9.75%, the dividend yield is also 9.75%. Therefore,
Annual Dividend = 0.0975 x $110.35 = $10.76 (rounded off to the nearest cent)
Hence, the correct choice is C.

The Preferred Stock of Acme International Is Selling Currently at $110.35