{"id":204344,"date":"2025-03-21T18:31:37","date_gmt":"2025-03-21T18:31:37","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=204344"},"modified":"2025-03-21T18:31:38","modified_gmt":"2025-03-21T18:31:38","slug":"if-d1-1-25-g-which-is-constant-4-7-and-p0-26-00","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/03\/21\/if-d1-1-25-g-which-is-constant-4-7-and-p0-26-00\/","title":{"rendered":"If D1 = $1.25, g (which is constant) = 4.7%, and P0 = $26.00"},"content":{"rendered":"\n<p>If D1 = $1.25, g (which is constant) = 4.7%, and P0 = $26.00, what is the stock&#8217;s expected dividend yield for the coming year?<\/p>\n\n\n\n<p><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-6-color\"><strong>The correct answer and explanation is :<\/strong><\/mark><\/p>\n\n\n\n<p>The <strong>dividend yield<\/strong> is calculated as:<\/p>\n\n\n\n<p>[<br>\\text{Dividend Yield} = \\frac{D_1}{P_0}<br>]<\/p>\n\n\n\n<p>where:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>( D_1 = 1.25 ) (Expected dividend for the coming year),<\/li>\n\n\n\n<li>( P_0 = 26.00 ) (Current stock price).<\/li>\n<\/ul>\n\n\n\n<p>[<br>\\text{Dividend Yield} = \\frac{1.25}{26.00} = 0.0481 \\text{ or } 4.81\\%<br>]<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Explanation:<\/h3>\n\n\n\n<p>The dividend yield is a measure of how much a company pays out in dividends each year relative to its stock price. It represents the return an investor can expect from dividends alone, without considering capital gains.<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Understanding Dividend Yield<\/strong><br>Dividend yield is crucial for income-focused investors who prioritize consistent cash flows from dividends rather than stock price appreciation. It is often compared to other income-generating investments, such as bonds or fixed deposits.<\/li>\n\n\n\n<li><strong>Why It Matters<\/strong><\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A higher dividend yield may indicate a strong income-generating investment, but it could also signal financial instability if the payout is unsustainable.<\/li>\n\n\n\n<li>A lower dividend yield may suggest a growth-oriented company that reinvests profits rather than distributing them as dividends.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Interpreting the 4.81% Yield<\/strong><\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>In this scenario, the stock\u2019s <strong>dividend yield is 4.81%<\/strong>, meaning for every dollar invested, the investor expects to earn <strong>4.81 cents in dividend income<\/strong>.<\/li>\n\n\n\n<li>If the company maintains its dividend policy and the stock price remains unchanged, an investor would receive an annual return of 4.81% purely from dividends.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Total Expected Return<\/strong><br>If we consider total return, including capital gains, the <strong>expected stock return<\/strong> can be found using the Gordon Growth Model: [<br>r = \\text{Dividend Yield} + g<br>] [<br>r = 4.81\\% + 4.7\\% = 9.51\\%<br>] This means an investor can expect a total return of <strong>9.51% per year<\/strong>, assuming a constant growth rate.<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"<p>If D1 = $1.25, g (which is constant) = 4.7%, and P0 = $26.00, what is the stock&#8217;s expected dividend yield for the coming year? The correct answer and explanation is : The dividend yield is calculated as: [\\text{Dividend Yield} = \\frac{D_1}{P_0}] where: [\\text{Dividend Yield} = \\frac{1.25}{26.00} = 0.0481 \\text{ or } 4.81\\%] Explanation: The [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-204344","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/204344","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=204344"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/204344\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=204344"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=204344"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=204344"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}