Question

1. Mark owns a stock with a market price of $53 per share. This stock pays a constant annual dividend of $1.64 a share. If the price of the stock suddenly falls to $41 a share, you would expect the:
I. dividend yield to increase.
II. dividend yield to decrease.
III. growth rate to increase.
IV. growth rate to decrease.

a) II only

b) I and III only

c) II and IV only

d) III only

e) I only

2. The 1800Flowers.com pays a constant annual dividend of $1.40 a share and currently sells for $15.00 a share. What is the rate of return?

a) 11.60 percent

b) 9.33 percent

c) 10.40 percent

d) 4.64 percent

e) 3.87 percent

Answer 1

1.
Dividend yield increases with fall in price
Growth rate decreases with fall in price
I and III only

2.
=Dividend/Price
=1.40/15
=9.33%