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30 April, 19:38

Yankee Athletic Club has preferred stock with a par value of $80 and an annual 8 % cumulative dividend. Given the following prices for the preferred stock, what is each investor seeking for his or her return? a. Alex is willing to pay $35. b. Derek is willing to pay $30. c. Marcia is willing to pay $20. d. Johnny is willing to pay $10. a. If Alex is willing to pay $35 for the preferred stock, what rate of return is he seeking?

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  1. 30 April, 22:09
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    Answer is explained below.

    Explanation:

    Annual dividend = (80*6%) = $4.8

    1. Required return=annual dividend/current price = (4.8/40) = 12%

    2. Required return = (4.8/25) = 19.2%

    3. Required return = (4.8/20) = 24%

    4. Required return = (4.8/10) = 48%
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Home » Business » Yankee Athletic Club has preferred stock with a par value of $80 and an annual 8 % cumulative dividend. Given the following prices for the preferred stock, what is each investor seeking for his or her return? a. Alex is willing to pay $35. b.
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