Green Corp.'s preference shares are selling for $20.83.If the company pays $2.50 annual dividends, what is the expected rate of return on its shares?

Question

Quizplus · Accepted Answer

To calculate the expected rate of return on preference shares, we use the formula: Expected Rate of Return = Annual Dividend / Market Price per Share. 
Substituting the given values, we get: Expected Rate of Return = $2.50 / $20.83 = 0.12 or 12%. 
Therefore, the correct answer is B) 12.00%.