Roy's Welding preferred stock sells for $48.96 a share and pays a constant annual dividend. The market rate of return on this preferred is 7.4 percent. What is the amount of the annual dividend on the preferred stock

The amount of the annual dividend on the preferred stock is $ 3.62.

Explanation:

This question requires us to calculate annual dividend on preferred stock. Annual rate of return on preferred stock and market value of share is given in the problem. We know that market value of stock is determine by dividing dividend that stock paid with market rate of return. Detail calculation is given below.

Market value = Dividend/Required Retrun

$ 48.96 = Dividend / 7.4%

Dividend = $ 3.62