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4 May, 08:27

Kate owns a stock with a market price of $31 per share. This stock pays a constant annual dividend of $0.60 per share. If the price of the stock suddenly increases to $36 a share, you would expect the:

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  1. 4 May, 08:57
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    Dividend yield is decreased by 0.27%

    Explanation:

    In this question, we have to find out the dividend yield which is shown below:

    In the first case:

    Market price = $31 per share

    Annual dividend = $0.60 per share

    So, the dividend yield = ($0.60 per share : $31 per share) * 100

    = 1.94%

    In second case:

    Market price = $36 per share

    Annual dividend = $0.60 per share

    So, the dividend yield = ($0.60 per share : $36 per share) * 100

    = 1.67%

    By comparing these two cases, we get to know that the dividend yield is decreased by 0.27% (1.94% - 1.67%)
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