Mackery, Inc., has an outstanding issue of preferred stock that pays a $5.6 dividend every year. If this issue currently sells for $82.08 per share, what return to market investors require on it currently

Question

Makena

Business

25 August, 04:35

Mackery, Inc., has an outstanding issue of preferred stock that pays a $5.6 dividend every year. If this issue currently sells for $82.08 per share, what return to market investors require on it currently

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Answers (1)

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Isis Kidd · Answer 1

The current return to market investors is 6.8%

Explanation:

The return to market investors currently can be expressed the dividends divided by market price. This is computed below:

Return on preferred stock=$5.6/$82.08

=0.068

The return on preferred stock is 6.8% in percentage terms.

Ordinarily, the return on stock is usually made of up dividend yield as calculated as well as gains yield, which is the return derived from increase in market share price of the stock.

Since the increase or decrease in share price is not given in this question, we assume only dividend yield is applicable, hence we calculated return accordingly.