A 12% stock yielding 10% is quoted at what price?

Concept / Approach

• Dividend is paid on face value; yield is income as a percentage of the market value.
• For one Rs. 100 stock paying 12% dividend, the annual income is Rs. 12.
• If the yield is 10%, then Rs. 12 must be 10% of the market price.

Step-by-step calculationYield = (Dividend / Market value) × 10010 = (12 / P) × 100P = (12 × 100) / 10 = 120

VerificationAt price Rs. 120, income 12 gives yield 12/120 = 0.10 = 10%.

Common pitfalls

• Using face value instead of market value in the yield formula.

Final AnswerRs. 120