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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.

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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 ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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