SIE Exam Question 444: Answer and Explanation

Question: 444

ABC common stock declined dramatically in value over the last quarter but the dividend it declared for payment this quarter has remained the same. The dividend yield on the stock has:

• A. Gone up as the price of ABC has fallen.
• B. Not changed because the board has to declare the dividend amount.
• C. Been fixed at the time of issuance.
• D. Gone down because the yield is a stated rate.

Correct Answer: A

Explanation:

A: The yield on the stock will have gone up as the price has fallen because the dividend has remained constant.