Question

Carter's preferred stock pays a dividend of $1.00 per quarter. If the price of the stock is $45.00, what is its nominal (not effective) annual rate of return?

Answer 1

Answer:

8.89%

Explanation:

The answer is 8.89%

Here is how we arrived at this.

Dividend = 1$ times 4

= $4 annually

Then we calculate for the nominal rate of return.

This is equal to dividend / price.

= $4/ $45

= 0.0889

To convert this to percentage

0.089 x 100

= 8.89% is the nominal annual rate of return.