Question

Rebello's preferred stock pays a dividend of $1.00 per quarter, and it sells for $55.00 per share. what is its effective annual

Answer 1

To solve for the effective annual rate of return:

Effective annual rate of return = (1+(quarterly dividend/preferred stock price))/periods per year)-1
Quarterly dividend = $1.00
Preferred stock price = $55.00
Periods per year = 4
EFF annual rate of return = (1+(1.00/55))/4-1
EFF annual rate of return = 7.47%