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) 5.5%
B) 1.0%
C) 11.0 %
D) 22.2%

Question

Quizplus · Accepted Answer

The rate of return on preferred stock can be calculated using the formula: Dividend/Price. In this case, the dividend is $5.50 and the price is $50. Dividing the dividend by the price gives a rate of return of 11%. Therefore, the best choice is C.

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