Alcott's preferred stock pays a dividend of $1

Finance Oct 10, 2020

Alcott's preferred stock pays a dividend of $1.00 per quarter. If the price of stock is $45.00, what is its nominal (not effective) annual rate of return?

Expert Solution

Nominal rate of return= (Annual Dividend/ Price of stock)*100

here,

Annual dividend= $1* 4

= $4

Price of stock = $45

Put the values in the formula;

= [$4/ $45]* 100

= 8.89%

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