Davis Gas & Electric issued preference shares in 1985 that had a par value of $50.The shares pay a dividend of 7.875%.Assume that the shares are currently selling for $62.50.What is the preferred shareholder's expected rate of return? Round to the nearest 0.01%.

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The expected rate of return for preferred shares is calculated by dividing the annual dividend by the current market price. The annual dividend is 7.875% of the par value ($50), which is $3.9375. Dividing $3.9375 by the current price of $62.50 gives approximately 6.30%.

Davis Gas & Electric Issued Preference Shares in 1985 That