Potter\'s Violin Co. has just issued nonconvertible preferred stock with a par v

Question

Potter's Violin Co. has just issued nonconvertible preferred stock with a par value of $100 and an annual dividend rate of 17.04 percent. The preferred stock is currently selling for $139.98 per share. Which rate of return does the investor expect to receive on this stock if the stock is purchased today? Round the answer to two decimal places in percentage form. (Write the percentage sign in the "units" box) Your Answer: Answer units Save Page 4 of 4 Next Page Save All Responses Go to Submit Quiz

Explanation / Answer

Answer.

Par Value = $100
Annual Dividend Rate = 17.04%
Current Price = $139.98

Annual Dividend = Par Value * Annual Dividend Rate
Annual Dividend = $100 * 17.04%
Annual Dividend = $17.04

Rate of Return = Annual Dividend / Current Price
Rate of Return = $17.04 / $139.98
Rate of Return = 0.1217
Rate of Return = 12.17%

So, rate of return on this stock is 12.17%

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