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Contrast between preferred and common stock

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Reference no: EM132421263

Question 1: A stock is expected to pay a year-end dividend of $4.00. The dividend is expected to grow at a rate of 7% a year forever. If the company is in equilibrium and its expected and required rate of return is 10%, what is the price of stock? Show all calculations.

Question 2: Zello's preferred stock pays a dividend of $2.00 per months. If the price of the stock is $85.00, what is its nominal (not effective) annual rate of return? Show all calculations.

Question 3: Contrast between preferred and common stock. Discuss which one of these two investments is suitable for investors.

Reference no: EM132421263

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