Question

An investor who currently holds 582 shares because he created a dividend by selling 28 shares has done the equivalent of a:

		4.5% increase in dividend yield.
		4% increase in dividend yield.
		4% decrease in dividend yield.
		4.5% increase in ownership of the company.

Answer 1

The correct answer is option a. 4.5% increase in dividend yield.


Number of shares before creating dividends = 582 + 28 = 610

By selling the shares, the investor has created dividends. In other words, the investor has increased his dividend yields by 4.5%

Increase in dividend yields = Number of shares sold/Number of shares before creating dividends

Increase in dividend yields = 28/610

Increase in dividend yields = 0.04590163934

Increase in dividend yields = 4.5%

Options b and c are incorrect for because the increase in dividends is 4.5%

Option d is incorrect because the ownership in the company decreases by 4.5%

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