An investor buys a stock for $10,000 and earns dividends of $250 during the course of the year.At the end of the year, the stock is worth $9,300.The dividend yield for the year is

Question

Quizplus · Accepted Answer

Dividend Yield = (Dividend earned during the year / Initial investment) x 100

Dividend earned during the year = $250
Initial investment = $10,000
Ending value of the stock = $9,300

Total Return = (Change in price + Dividends earned) / Initial investment = (($9,300 - $10,000) + $250) / $10,000= -0.0425 or -4.25%

Dividend Yield = (Dividend earned during the year / Initial investment) x 100 = ($250 / $10,000) x 100 = 2.5%

Therefore, the correct answer is B) 2.5 percent.

An Investor Buys a Stock for $10,000 and Earns Dividends