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What rate of return will she realize on the investment

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Question: Charlene Weaver likes to speculate with preferred stock by trading on movements in market interest rates. Right now, she believes the market is poised for a big drop in rates. Accordingly, she is thinking seriously about investing in a certain preferred stock that pays $7 in annual dividends and is currently trading at $75 a share. What rate of return will she realize on this investment if the market yield on the preferred share drops to 6.5% within 2 years? What if the drop in rates takes place in 1 year?

Reference no: EM131627447

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