What is effective annual rate for higher yielding security

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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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