Equities and Investments or Stocks and Shares

(1) A company declares an annual dividend of 8% on its 10$ stock. How much money is required to buy 500 shares at a market price of $12 each?

• (a) $5000
• (b) $6000
• (c) $6000
• (d) $7200

Answer

Correct Answer: (c) $6000
To buy 500 shares at $12 each, the investment is calculated as follows:
\[ \text{Investment} = \text{Number of shares} \times \text{Market price per share} = 500 \times 12 = \$6000 \]

(2) If the market value of a 5% $100 stock is $80, what is the yield percentage?

• (a) 6.25%
• (b) 6.25%
• (c) 5%
• (d) 7.5%

Answer

Correct Answer: (b) 6.25%
Yield is calculated by dividing the annual dividends by the market price per share:
\text{Yield} = \frac{\text{Annual dividends per share}}{\text{Market price per share}} \times 100 = \frac{5}{80} \times 100 = 6.25\%

(3) An investor buys a stock at a dividend yield of 10% and sells it at a yield of 8%. If the original dividend was $2.50 per share, what was the selling price?

• (a) $31.25
• (b) $30.00
• (c) $31.25
• (d) $32.50

Answer

Correct Answer: (c) $31.25
The selling price based on the yield can be calculated as follows:
\[ \text{Selling price} = \frac{\text{Annual dividend per share}}{\text{Yield at selling price}} = \frac{2.50}{0.08} = \$31.25 \]

(4) An investor purchased 200 shares of a company’s stock at $50 per share. If the company pays an annual dividend of $3 per share, what is the investor’s annual dividend income from this investment?

• (a) $500
• (b) $600
• (c) $700
• (d) $600

Answer

Correct Answer: (d) $600
The investor’s annual dividend income can be calculated by multiplying the number of shares by the annual dividend per share:
\[ \text{Annual Dividend Income} = \text{Number of Shares} \times \text{Annual Dividend per Share} = 200 \times 3 = $600 \]

(5) Company A has a total of 1,000 shares outstanding, and Company B has a total of 2,000 shares outstanding. If both companies pay a dividend of $2 per share, which company pays a higher total annual dividend?

• (a) Company B
• (b) Company A
• (c) Both companies pay the same total dividend
• (d) Insufficient information to determine

Answer

Correct Answer: (a) Company B
To determine the total annual dividend paid by each company, you can use the following formulas:
For Company A: \[ \text{Total Annual Dividend (Company A)} = \text{Number of Shares (Company A)} \times \text{Dividend per Share} = 1,000 \times 2 = $2,000 \]
For Company B: \[ \text{Total Annual Dividend (Company B)} = \text{Number of Shares (Company B)} \times \text{Dividend per Share} = 2,000 \times 2 = $4,000 \]
Therefore, Company B pays a higher total annual dividend.