Calculating nominal and effective annual rate of return


Harrison Clothiers' stock currently sells for $20 a share. It just paid the dividend of $1.00 a share (that is, Do=$1.00). The dividend is expected to grow at a stable rate of six percent a year. What stock price is expected 1 year from now? Determine the required rate of return?

Preferred stock returns Bruner Aeronautics has perpetual preferred stock outstanding with the par value of $100. The stock pays the quarterly dividend of $2, and its current price is $80.

a. Find out its nominal annual rate of return?

b. Find out its effective annual rate of return?

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Basic Statistics: Calculating nominal and effective annual rate of return
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