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8 August, 07:45

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

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  1. 8 August, 08:09
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    = 8.89%

    Explanation:

    Th rate of return on a preferred stock is the dividend divided by the price of the stock multiplied by 100

    Return = Dividend/price * 100

    Quarterly dividend = $1

    Annual dividend

    = 1 * 4 (Note there are four quarters in year)

    = $4

    Annual rate of return

    = (4/45) * 100

    = 8.89%
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