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eduard
3 years ago
14

Allison Corp. has just issued nonconvertible preferred stock (cumulative) with a par value of $20 and an annual dividend rate of

4.25%. The preferred stock is currently selling for $18.75 per share. What is the annual yield or return (r) on this preferred stock
Business
1 answer:
Artemon [7]3 years ago
4 0

Answer:

4.5%

Explanation:

Calculation for the annual yield or return (r) on this preferred stock

Using this formula

PVper = PMT / r

Where,

PVper =$18.75

PMT =(4.25%*$20)=0.85

Let plug in the formula

$18.75 = 0.85 / r

r = 0.045*100

r= 4.5%

Therefore the annual yield or return (r) on this preferred stock will be 4.5%

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