Question: 1. (Preferred stockholder expected return) You own 150 shares of Budd Corporation's preferred stock at a market price of $22 per share. Budd pays dividends of $1.55. What is your expected rate of return? If you have a required rate of return of 9 percent, should you buy more stock?
2. (Preferred stock expected return) You are considering the purchase of 150 shares of preferred stock. Your required return is 11 percent. If the stock is currently selling for $40 and pays a dividend of $5.25, should you purchase the stock?