A year ago, you bought some shares of CIA Company, which pays equal quarterly dividends.The income yield and the capital gain yield are 4.38 percent and 9.5 percent, respectively.The current price of CIA is $18.What was the quarterly dividend that CIA paid during the year?
A)$0.18
B)$0.41
C)$0.72
D)$1.64

Question

Quizplus · Accepted Answer

The income yield is the annual dividend divided by the current price of the stock. The capital gain yield is the annual change in the stock price divided by the current price of the stock. We can use these two yields to find the quarterly dividend.Income yield = Annual dividend / Current price4.38% = Annual dividend / $18Annual dividend = $0.79Capital gain yield = Annual change in stock price / Current price9.5% = (Current price - Purchase price) / $18Current price - Purchase price = $1.71Purchase price = Current price - Annual change in stock pricePurchase price = $18 - $1.71Purchase price = $16.29Quarterly dividend = Annual dividend / 4Quarterly dividend = $0.79 / 4Quarterly dividend = $0.1975The closest answer choice is $0.18, so the correct answer is A.

A Year Ago, You Bought Some Shares of CIA Company