Future Business Leaders of America (FBLA) Business Calculations Practice Test

Yield is:

1. The percentage of the stock price compared to the dividend

2. The price of a stock

3. The dividend of a stock

4. The percentage of the dividend compared to the stock price

The correct answer is: The percentage of the dividend compared to the stock price

Yield is defined as the percentage of the dividend compared to the stock price. This financial metric provides investors with a way to assess how much income they can expect to receive from their investment in relation to its current market value. Essentially, yield indicates the return on investment from dividends expressed as a percentage of the stock price. When determining yield, investors take the annual dividend amount and divide it by the current stock price, then multiply that result by 100 to get a percentage. This helps to evaluate the attractiveness of a stock investment, especially compared to other investment opportunities or benchmarks. Understanding yield is crucial for investors looking to make informed decisions; a higher yield may suggest a more lucrative investment opportunity, while a lower yield might indicate lesser returns. This makes option D the correct choice, emphasizing the relationship between dividends and stock price as a key aspect of yield.