What Is the Rate of Return on a Preferred Stock

question 61

Multiple Choice

What is the rate of return on a preferred stock that has a par value of $50, a market price of $46.50, and a dividend of $4.10?

• A) 8.20%
• B) 11.34%
• C) 8.82%
• D) 12.20%

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Definitions:

Times Interest Earned

A financial ratio that measures a company's ability to meet its debt obligations by comparing its income before interest and taxes (EBIT) to its interest expenses.

Balance Sheet

A financial statement that outlines a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a basis for computing rates of return and evaluating its capital structure.

Income Statement

An income statement is a financial statement that shows a company's revenues and expenses over a specific period, culminating in net profit or loss.

Equity Multiplier

A financial leverage ratio that measures the portion of a company's assets that are financed by stockholders' equity.