Calculating the return on a given stock
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CDE is issuing preferred stock with dividends at 8.12% of the $25 par value.
1. Assuming a price of $26.25 per share, calculate the return on the preferred stock.
2. The preferred stock will reach maturity in 20 years. With annual dividend payments and a price of $26.25 per share, calculate the return.
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Solution Summary
The solution describes the steps to estimate the return in the given case. Calculations are carried out with the help of functions in MS Excel.
Solution Preview
Please refer attached Excel file for better clarity of formulas.
a. If the current price is $26.25 per share, what is the return on the preferred stock?
Dividend=D=8.12% of face value=25*8.12%=$2.03
Price of Preferred stock=P=$26.25
Return on preferred ...
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- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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