The Triangle Store pays a constant dividend. Last year, the dividend yield was 5.4 percent when the stock was selling for $18 a share. What must the stock price be today if the market currently requires a 3.8 percent dividend yield on this stock?

Question

Quizplus · Accepted Answer

The dividend amount is constant, so we can calculate it using last year's yield: Dividend = 5.4% of $18 = $0.972. For the current yield of 3.8%, the stock price should be: $0.972 / 0.038 = $25.58.

The Triangle Store Pays a Constant Dividend