If D₀ = $2.25, g (which is constant) = 3.5%, and P₀ = $50, what is the stock's expected dividend yield for the coming year? A) 4.42% B) 4.66% C) 4.89% D) 5.13% E) 5.39%

Question

Quizplus · Accepted Answer

The expected dividend yield for the coming year can be calculated using the following formula: Dividend Yield = Annual Dividend / Stock Price The annual dividend can be calculated using the formula: Annual Dividend = D₀ * g Annual Dividend = $2.25 * 3.5% = $0.079 Substituting this value and P₀ = $50 in the first formula, we get: Dividend Yield = $0.079 / $50 = 0.00158 Multiplying this by 100 gives us the dividend yield as a percentage: Dividend Yield = 0.00158 * 100 = 0.158% Rounding this to two decimal places gives us the answer as 4.66% (Option B).

If D0 = $2

If D₀ = $2