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Alpha's preferred stock currently has a market price equal to $80 per share. If the dividend paid on this stock is $6 per share, what is the required rate of return investors are demanding from Alpha's preferred stock

Respuesta :

Answer:

the required rate of return is 7.5%

Explanation:

The computation of the required rate of return is shown below;

As we know that

The price of preferred stock = Dividend ÷ Required rate of returen

$80 = $6 ÷ required rate of return

So, the required rate of return is

= $6 ÷ $80

= 7.5%

hence, the required rate of return is 7.5%

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