Homework #5A (Value and expected rate of return on preferred stock)

Question 4

Potter's Violin Co. has just issued nonconvertible preferred stock with a pa value of $100 and an annual dividend rate of 19.61 percent. The preferred stock is currently selling for $119.69 per share. Which rate of return does the investor expect to receive on this stock if the stock is purchased today? Round answer to two decimal places.

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