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

Question

Quizplus · Accepted Answer

The expected rate of return is calculated by dividing the annual dividend by the current market price of the share. The annual dividend is 7.875% of $50, which is $3.9375. Dividing $3.9375 by the current price of $62.50 gives approximately 6.30%.

Alinta Gas & Electricity Issued Preference Shares That Had a Par