(Preferred stock expected return) You are planning to purchase 100 shares of pre

Question

(Preferred stock expected return) You are planning to purchase 100 shares of preferred stock and must choose between Stock A and Stock B. Stock A pays an annual dividend of $3.25 and is currently selling for $34. Stock B pays an annual dividend of $3.05 and is selling for $36. If your required return is 9.02 percent, which stock should you What is the expected return of Stock A? % (Round to two decimal places.) What is the expected return of Stock B? D-(Round to two decimal places.) If your required return is 9.02 percent, you should choose |. (Select from the drop-down menu.) None Stock B

Explanation / Answer

expected return of Stock A = 3.25/34 = 9.56%

expected return of Stock B = 3.05/36 = 8.47%

Stock A

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