Problem:
Five years ago, Jim Smith purchased 600 shares of 9%, $100 par value preferred stock for $75 per share. Smith received dividends on the stock each year for five years, and finally sold the stock for $90 per share. Instead of purchasing the preferred stock, Smith could have invested the funds in a money market certificate yielding a 16% rate of return.
Required:
Question: Determine whether or not the preferred stock provided at least the 16% rate of return that could have been received on the money market certificate.
Note: Provide support for rationale.