Question

You bought a share of 4 percent preferred stock for $97.61 last year. The market price for your stock is now $99.90. Assume a par value of $100.
  
What is your total return for last year?  (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
  

Answer 1

The person has bought the 4 percent preferred stock. This means this stock pays the dividend of 4% every year.

Par value of stock = $100

Rate of dividend = 4% or 0.04

Dividend reveived on preferred stock = Par value of stock * rate of dividend = $100 * 0.04 = $4

Purchase price of preferred stock = $97.61

Current market price of preferred stock = $99.90

Appreciation in value of stock = Current market price - Purchase price = $99.90 - $97.61 = $2.29

Calculate the total return for last year -

Total return = [(Dividend received on preferred stock + Appreciation in the value of stock)/Purchase price of preferred stock] * 100

Total return = [($4 + $2.29)/$97.61] * 100

Total return = [0.064440118] * 100

Total return = 6.444011884%

Thus,

Your total return for last year is 6.44%.