Calculate the Nominal Annual Rate of Return
Question:
Answer:
The nominal annual rate of return for this preferred stock is 5.67%.Explanation:
To calculate the nominal annual rate of return:
1. Calculate the annual dividend amount by multiplying the quarterly dividend by the number of quarters in a year:
$1.7 * 4 quarters = $6.8
2. Divide the annual dividend by the price of the preferred stock:
$6.8 / $120 = 0.0566667
3. Convert the result to a percentage by multiplying by 100:
0.0566667 * 100 = 5.67%
Therefore, the nominal annual rate of return for this preferred stock is 5.67%.