An issue of preference shares currently sells for $52.50 per share and pays a constant annual expected dividend of $2.25 per share.The expected return on this security is [blank].

Question

Quizplus · Accepted Answer

The expected return on a preference share is calculated by dividing the annual dividend by the current market price of the share. In this case, the expected return is $2.25/$52.50 = 0.0429, or 4.29%.

An Issue of Preference Shares Currently Sells for $52