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    bb2000's Avatar
    bb2000 Posts: 2, Reputation: 1
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    #1

    Feb 9, 2008, 04:46 PM
    Preferred stock required rate of return
    Preferred stock pays $5.00 in annual dividends. Required rate of return is 13%. How much should one consider paying for one share?
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #2

    Feb 9, 2008, 11:23 PM
    This is actually more of a math problem. This is actually asking, $5.00 is 13% OF what number? i.e. the original (bigger) number is what you would pay for the stock, and $5 is to be 13% of that.

    The "original" number is your base. $5 is 13% of it. To solve for a base, divide by the percent.
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