Carter's preferred stock pays a dividend of $1.00 per quarter.If the price of the stock is $70.00,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 total annual dividends paid and dividing by the price of the stock. Here, the quarterly dividend is $1.00, so the annual dividend is $1.00 * 4 = $4.00. Dividing this by the stock price of $70.00 gives $4.00 / $70.00 = 0.0571 or 5.71%.

Carter's Preferred Stock Pays a Dividend of $1