Question

The common shares of the Hiboux Ltd have a book value of $21.60 and a market value of $28.60. The company pays $0.28 in dividends each quarter. What is the dividend yield? A. 1.0% B. 1.3% C. 3.9% D. 5.2%

Answer 1

Answer: Option (c) is correct.

Explanation:

Shares book value = $21.60

market value = $28.60

Pays dividend in each quarter = $0.28

Annual dividend = Dividend in each quarter × 4

= $0.28 × 4 ⇒ $1.12

Therefore,

Dividend yield = $\frac{Annual\ Dividend}{Current\ Price}$

= $\frac{1.12}{28.60}$

= 3.9% (approx.)

Hence, dividend yield is 3.9%.