Question

Buxton Corp. has outstanding borrowings. One of these borrowings is nonconvertible preferred stock (cumulative) with a par value of $85 and an annual dividend rate of 6.20%. This preferred stock is currently selling for $56.50 per share. What is the yield or return (r) on this preferred stock?

a. 9.89%
b. 9.56%
c. 9.32%
d. 9.22%

Answer 1

c. 9.32%

Step-by-step explanation:

The computation of the yield or return on the preferred stock is shown below:

= (Annual dividend rate × par value ) ÷ current stock price

= (6.20% × $ 85 ) ÷ $56.50

= 9.32%

Hence, the yield or return on the preferred stock is %

Therefore the correct option is c.

We simply applied the above formula so that the correct value could come

And, the same is to be considered