{"id":213551,"date":"2025-05-11T17:31:53","date_gmt":"2025-05-11T17:31:53","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=213551"},"modified":"2025-05-11T17:31:55","modified_gmt":"2025-05-11T17:31:55","slug":"knowledge-check","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/05\/11\/knowledge-check\/","title":{"rendered":"KNOWLEDGE CHECK"},"content":{"rendered":"\n<p>KNOWLEDGE CHECK<\/p>\n\n\n\n<p>If the earnings per share of a company is $3.85 and the earnings yield is 2.5%, what is the price per share?<\/p>\n\n\n\n<p>$64.94<br>$6.49<br>$154.00<br>$1.54<\/p>\n\n\n\n<p><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-0-color\">The Correct Answer and Explanation is:<\/mark><\/strong><\/p>\n\n\n\n<p>To find the <strong>price per share<\/strong>, we can use the formula related to <strong>Earnings Yield<\/strong>: Earnings&nbsp;Yield=Earnings&nbsp;per&nbsp;Share&nbsp;(EPS)Price&nbsp;per&nbsp;Share\u00d7100\\text{Earnings Yield} = \\frac{\\text{Earnings per Share (EPS)}}{\\text{Price per Share}} \\times 100<\/p>\n\n\n\n<p>We are given:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Earnings per Share (EPS)<\/strong> = $3.85<\/li>\n\n\n\n<li><strong>Earnings Yield<\/strong> = 2.5%<\/li>\n<\/ul>\n\n\n\n<p>Let\u2019s plug the values into the formula and solve for <strong>Price per Share<\/strong>: 2.5=(3.85Price&nbsp;per&nbsp;Share)\u00d71002.5 = \\left(\\frac{3.85}{\\text{Price per Share}}\\right) \\times 100<\/p>\n\n\n\n<p>First, divide both sides by 100: 0.025=3.85Price&nbsp;per&nbsp;Share0.025 = \\frac{3.85}{\\text{Price per Share}}<\/p>\n\n\n\n<p>Now solve for <strong>Price per Share<\/strong>: Price&nbsp;per&nbsp;Share=3.850.025=154\\text{Price per Share} = \\frac{3.85}{0.025} = 154<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">\u2705 Correct Answer: <strong>$154.00<\/strong><\/h3>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\">\ud83d\udd0d Explanation (300+ words):<\/h3>\n\n\n\n<p>This problem involves understanding the relationship between a company&#8217;s earnings and its stock price using <strong>earnings yield<\/strong>. The <strong>earnings yield<\/strong> is a financial metric that shows the percentage return an investor earns from each dollar invested in the stock, based on the company\u2019s earnings. It&#8217;s the reciprocal of the <strong>price-to-earnings (P\/E) ratio<\/strong>.<\/p>\n\n\n\n<p>Here\u2019s what each term means:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Earnings per Share (EPS):<\/strong> This indicates how much profit a company makes for each share of stock outstanding. In this case, it\u2019s $3.85.<\/li>\n\n\n\n<li><strong>Earnings Yield:<\/strong> This is calculated by dividing the EPS by the price per share and is usually expressed as a percentage. A 2.5% earnings yield means for every dollar you invest, the company earns $0.025.<\/li>\n<\/ul>\n\n\n\n<p>To find the <strong>price per share<\/strong>, we rearrange the earnings yield formula: Price&nbsp;per&nbsp;Share=EPSEarnings&nbsp;Yield&nbsp;(as&nbsp;a&nbsp;decimal)\\text{Price per Share} = \\frac{\\text{EPS}}{\\text{Earnings Yield (as a decimal)}}<\/p>\n\n\n\n<p>Substituting in the values: 3.850.025=154\\frac{3.85}{0.025} = 154<\/p>\n\n\n\n<p>This tells us that to achieve an earnings yield of 2.5% from a company earning $3.85 per share, you would have to pay <strong>$154 per share<\/strong>.<\/p>\n\n\n\n<p>Understanding this helps investors evaluate whether a stock is over- or undervalued. A lower earnings yield typically means a higher price relative to earnings, suggesting the stock might be expensive, unless strong growth is expected.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>KNOWLEDGE CHECK If the earnings per share of a company is $3.85 and the earnings yield is 2.5%, what is the price per share? $64.94$6.49$154.00$1.54 The Correct Answer and Explanation is: To find the price per share, we can use the formula related to Earnings Yield: Earnings&nbsp;Yield=Earnings&nbsp;per&nbsp;Share&nbsp;(EPS)Price&nbsp;per&nbsp;Share\u00d7100\\text{Earnings Yield} = \\frac{\\text{Earnings per Share (EPS)}}{\\text{Price per Share}} [&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-213551","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/213551","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=213551"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/213551\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=213551"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=213551"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=213551"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}