JPMorgan Chase & Co.'s preferred stock pays a dividend of $1.00 per quarter, and it sells for $55.00 per share. What is its effective annual (not nominal) rate or return?
Answers
The effective annual rate or return on JPMorgan Chase & Co.'s preferred stock can be calculated using the following formula:
Effective Annual Rate = (Dividend × 4) / Price
In this case, the effective annual rate or return is 4.36%:
Effective Annual Rate = ($1.00 x 4) / $55.00 = 4.36%
This effective annual rate or return reflects the dividend yield that investors earn when they purchase shares of JPMorgan Chase & Co.'s preferred stock at the current market price.
e. 7.47% Periods per year = 4 Pref. quarterly dividend = $1.00 Preferred stock price = $55.00 Eff % required return = (1+ (Qt Div/P))N â 1 = 7.47%