Question

Fee Founders has perpetual preferred stock outstanding that sells for $60 a share and pays a dividend of $5 at the end of each year. What is the required rate of return?

Answer 1

Answer:

8.33%

Explanation:

The required rate of return of the Preferred stock which the Fee Founders has shall be determined through following mentioned formula:

r=d/p

Applying the data from the given question in the above mentioned formula

r=required rate of return=?

d=dividend paid per share=$5

p=price of preferred stock=$60

r=5/60=8.33%=required rate of return