Explore BrainMass

Explore BrainMass

    Return on Preferred Stock

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Preferred Products has issued preferred stock with an $8 annual dividend that will be paid in perpetuity.
    a. If the discount rate is 12 percent, at what price should the preferred sell?
    b. At what price should the stock sell 1 year from now?
    c. What is the dividend yield, the capital gains yield, and the expected rate of return of the stock?

    © BrainMass Inc. brainmass.com March 4, 2021, 6:24 pm ad1c9bdddf
    https://brainmass.com/business/finance/return-on-preferred-stock-43143

    Solution Preview

    Preferred Products has issued preferred stock with an $8 annual dividend that will be paid in perpetuity.

    a. If the discount rate is 12 percent, at what price should the preferred sell?

    b. At what price should the stock sell 1 year from now?

    c. What is the dividend yield, the capital gains yield, and the expected rate of return of the stock?

    Price of Preferred ...

    Solution Summary

    The solution calculates price of preferred stock now, price 1 year from now, the dividend yield, the capital gains yield, and the expected rate of return of the preferred stock.

    $2.49

    ADVERTISEMENT