Your firm has preferred stock outstanding that pays a current dividend

Your firm has preferred stock outstanding that pays a current dividend of $2.00 per year and has a current price of $21.50. Currently, preferred stock makes up approximately 15% of your firm’s long-term financing.

What is the market required rate of return on your firm’s preferred stock?
A) 8.70%
B) 9.00%
C) 9.30%
D) 15.00%

ANSWER

Answer: C
Explanation: C) Rps = = = 9.30%.