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 $18.75 per share. What is the annual yield or return (r) on this preferred stock?
|Par value of preferred stock =||$ 20.00|
|Annual dividend rate =||4.25%|
|Annual dividend = 20 * 4.5% =||$ 0.85|
|Current market price =||$ 18.75|
|Annual yield or return = Annual dividend / Current market price|
|So, Annual dividend or return on preferred stock is 4.53%|
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