Bedeker, Inc., has an issue of preferred stock outstanding that pays a $4.75 dividend every year in perpetuity. If this issue currently sells for $98 per share, what is the required return

4.85%

Explanation:

The computation of the required return is shown below:

Data provided in the question

Dividend for preference stock = $4.75

And, the current selling price of the stock is $98

So, the required return is

= Dividend for preference stock : current selling price of the stock

= $4.75 : $98

= 4.85%

We simply applied the above formula to determine the required return