What is effective annual rate for higher yielding security

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Reference no: EM131500395

Currently, you are investment manager for Chekhov Corporation and must choose between ABC bonds and XYZ preferred stock for the company’s pension plan. XYZ stock is in perpetuity and it pays a quarterly dividend of $2.75, and it sells for $86.45 per share. ABC bonds sell for $1,080 per bond, have a $1000 par value, pay a coupon of $65 every 6 months and mature in 10 years. What is the effective annual rate (EAR) for the higher yielding security?

Reference no: EM131500395

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