Multiple Choice
Which of the following is an example of an equity investment?
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7. Receivables and Investments
Introduction to Investments in Securities
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In the context of stock listings, what does the 'yield %' represent?
A
The percentage increase in the stock's price over the past year.
B
The interest rate paid on bonds issued by the company.
C
The company's net income as a percentage of total assets.
D
The annual dividend paid by a company expressed as a percentage of its current market price.
Verified step by step guidance1
Understand that 'yield %' in the context of stock listings refers to the annual dividend yield, which is a measure of the return on investment for a stock based on its dividends.
Recognize that the formula for calculating the dividend yield is: Yield % = (Annual Dividend / Current Market Price) × 100.
Break down the components: the 'Annual Dividend' is the total dividend paid by the company over a year, and the 'Current Market Price' is the stock's current trading price.
Interpret the result: The yield % indicates how much return an investor can expect from dividends relative to the stock's current price, expressed as a percentage.
Note that this metric is useful for investors seeking income from dividends, as it helps compare the attractiveness of different stocks based on their dividend payouts.
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