Question

A stock's cash dividend divided by its current price is known as which of the following?...

A stock's cash dividend divided by its current price is known as which of the following?

a.Coupon rate

b.Dividend yield

c.Capital gains yield

d.Yield to maturity

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Answer #1

The dividend yield is computed by using the below mentioned formula:

= Dividend / share price

So, the correct answer is option b i.e. Dividend yield.

The coupon rate is computed by dividing the coupon payment by the par or face value of the bond.

Capital gain yield is computed as follows:

= (Price at end of period - Price at beginning of period) / Price at beginning of period

The YTM is computed as follows:

= [ Coupon payment + ((Face value - price) / time period) ] / [ ( Face value + price ) / 2 ]

So the correct answer is option b i.e. Dividend yield

Feel free to ask in case of any query relating to this question

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