Suppose Bon Temps decided to issue preferred stock that would pay an annual dividend of $5 and

Question:

Suppose Bon Temps decided to issue preferred stock that would pay an annual dividend of $5 and that the issue price was $50 per share. What would be the stock’s expected return? Would the expected rate of return be the same if the preferred was a perpetual issue or if it had a 20-year maturity?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...