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Nominal and Effective Annual Rate of Return

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Bruner Aeronautics has perpetual preferred stock outstanding with a par value of $100.00. The stock pays a quarterly dividend of $2, and its current price is $80.00.
(a) What is its nominal annual rate of return?
(b) What is its effective annual rate of return?

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This solution is comprised of detailed calculation of nominal annual rate of return and effective annual rate of return.

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