You purchase 100 shares of stock at a price of $45 per share. One year later, the shares are selling for $47 per share. In addition, a dividend of $4 per share is paid at the end of each year.

What is the dividend yield for the investment?

Question

You purchase 100 shares of stock at a price of $45 per share. One year later, the shares are selling for $47 per share. In addition, a dividend of $4 per share is paid at the end of each year.

What is the dividend yield for the investment?

Quizplus · Accepted Answer

The dividend yield is calculated as the annual dividend per share divided by the current stock price. In this case, the annual dividend per share is $4, and the current stock price is $47. Therefore, the dividend yield is $4/$47 = 0.085, or 8.5%.

You Purchase 100 Shares of Stock at a Price of $45