Caldwell Corp.has outstanding borrowings.One of these borrowings is nonconvertible preferred stock (cumulative)with a par value of $75 and an annual dividend rate of 8.25%.This preferred stock is currently selling for $56.46 per share.What is the yield or return (r)on this preferred stock?

Question

Quizplus · Accepted Answer

The yield or return (r) on preferred stock can be calculated using the formula:

r = (annual dividend payment / current market price) x 100

First, we need to calculate the annual dividend payment on the preferred stock:

Annual dividend payment = par value x annual dividend rate
= $75 x 0.0825
= $6.1875

Next, we can plug in the values to calculate the yield or return:

r = ($6.1875 / $56.46) x 100
= 10.959%

Therefore, the correct answer is choice C, with a yield or return of 10.959%.