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Question 16 of 50) You purchased 220 shares of stock at a price of $5217 per share. over the...

Question:

You purchased 220 shares of stock at a price of $52.17 per share. Over the last year, you have received total dividend income of $230.

What is the dividend yield?

a. 4.6%

b. 2.0%

c. 97%

d. 44%

e. 1.0%

Dividend Yield:

The dividend yield is a financial ratio for evaluating how much a company pays in dividends relative to its market price per share. The ratio is calculated as the dividend per share divided by the current price per share. Dividend yield fluctuates from year to year because of market volatility and different amount of dividends paid every year.

Answer and Explanation:

The correct answer is b

The dividend yield is calculated using the following formula.

  • {eq}dividend\ yield = \frac{Annual\ dividend}{Current\ stock\ price} {/eq}


The dividend per share is determined as follows.

  • {eq}dividend\ per share = \frac{Total\ dividends}{No\ of shares} {/eq}
  • {eq}dividend\ per share = \frac{\$230}{220} {/eq}
  • {eq}Dividend\ per\ share = $1.05 {/eq}


The dividend yield for the stock is calculated as follows.

  • {eq}dividend\ per share = \frac{\$1.05}{\$52.17}*100 {/eq}
  • {eq}Dividend\ yield = 2.0\% {/eq}

Learn more about this topic:

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What Is Dividend Yield? - Definition & Calculation

from Corporate Finance: Help & Review

Chapter 2 / Lesson 10
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