Question

Amazon Corporation has preferred stock outstanding that pays a $11.45 annual dividend. It price is $147. What is the required rate of return (yield) on the preferred stock?

Answer 1

Answer:

7.79%

Explanation:

Calculation to determine the required rate of return (yield) on the preferred stock

Using this formula

Cost of preferred stock=Annual Dividend per share/Current price of preferred stock

Let plug in the formula

Cost of preferred stock=$11.45/$147

Cost of preferred stock=0.0779*100

Cost of preferred stock=7.79%

Therefore the required rate of return (yield) on the preferred stock is 7.79%