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

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?

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Answer #1
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
0.85/18.75
0.045333 or 4.53%
So, Annual dividend or return on preferred stock is 4.53%
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