Bayside Marina just announced it is decreasing its annual dividend from $1.48 per share to $1.45 per share effective immediately. If the dividend yield remains at its pre-announcement level, then you know the stock price:

Question

Quizplus · Accepted Answer

If the dividend yield remains constant, it means that the decrease in dividend must be reflected in a decrease in the stock price. This is because dividend yield is calculated by dividing the annual dividend by the stock price. Therefore, if the dividend decreases, the stock price must also decrease proportionally in order to keep the dividend yield constant. Option C is the only choice that reflects this relationship.

Bayside Marina Just Announced It Is Decreasing Its Annual Dividend