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Math  /  Algebra

QuestionWhat is the dividend yield on Stock AA that sells at $25/\$ 25 / share, when Company A pays a quarterly dividend of $0.20\$ 0.20 per share?
Dividend Yield = [?]\% Dividend Yield = Annual Dividend  Share Price =\frac{\text { Annual Dividend }}{\text { Share Price }}

Studdy Solution

STEP 1

1. The stock price for Company A is $25\$25 per share.
2. The quarterly dividend paid by Company A is $0.20\$0.20 per share.
3. Dividend yield is calculated as the ratio of the annual dividend to the current share price, expressed as a percentage.

STEP 2

1. Calculate the annual dividend from the quarterly dividend.
2. Use the formula for dividend yield to find the yield as a percentage.

STEP 3

Calculate the annual dividend from the quarterly dividend.
Given: Quarterly Dividend=$0.20\text{Quarterly Dividend} = \$0.20
Since there are 4 quarters in a year, the annual dividend is: Annual Dividend=4×Quarterly Dividend=4×0.20=$0.80\text{Annual Dividend} = 4 \times \text{Quarterly Dividend} = 4 \times 0.20 = \$0.80

STEP 4

Use the formula for dividend yield to find the yield as a percentage.
The formula for dividend yield is given by: Dividend Yield=(Annual DividendShare Price)×100\text{Dividend Yield} = \left( \frac{\text{Annual Dividend}}{\text{Share Price}} \right) \times 100
Substituting the known values: Dividend Yield=(0.8025)×100\text{Dividend Yield} = \left( \frac{0.80}{25} \right) \times 100
Calculate the value: Dividend Yield=0.032×100=3.2%\text{Dividend Yield} = 0.032 \times 100 = 3.2\%
The dividend yield on Stock AA is 3.2%3.2\%.

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