Crane Industries Inc. has outstanding borrowings that include preferred stock. One of these borrowings is (nonconvertible) preferred stock (cumulative) with a par value of $250 and an annual dividend rate of 8.25%
This preferred stock is currently selling for $260 per share. What is the yield or return on this nonconvertible preferred stock?
What will be an ideal response?
Answer: We first determine the annual dividend by multiplying the dividend rate against the par value: $250 × 0.0825 = $20.625. Now, dividing this $20.625 annual dividend by the current price of $260.00, we get 0.079327, or about 7.93%.
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