Question
(Preferred stock expected return) You are planning to purchase 200 shares of preferred stock and must choose between Stock A and Stock B. Stock A
(Preferred stock expected return) You are planning to purchase 200 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 choose?
What is the expected return of Stock A? _____% (Round to two decimal places.)
What is the expected return of Stock B? _____% (Round to two decimal places.)
If your required return is 9.02 percent, you should choose Stock B or Stock A or None
(Preferred stock expected return) You are considering the purchase of 100 shares of preferred stock. Your required return is 14 percent. If the stock is currently selling for $33 and pays a dividend of $5.25, should you purchase the stock?
a. What is the expected rate of return of the stock? _____%
b. If you have a required rate of return of 14%, you should not/should purchase the stock because the stock's expected rate of return is greater than/less than your required rate of return.
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