Mathematics Standard • Year 12 • Investment and Loans • Lesson 14
Shares, Dividends and Yield, Skill Drill
Build fluency in the two calculations this lesson turns on: the dividend paid on a parcel, and the dividend yield on one share. Then practise the reverse direction, which is where the marks separate.
1. Quick recall
Answer in the space provided. 1 mark each
Q1.1 Write the formula for the dividend paid on a parcel of shares.
Q1.2 Write the formula for the dividend yield.
Q1.3 Which of those two uses the number of shares, and which does not?
Q1.4 Does the dividend yield use the price you paid, or the price today?
2. Dividend paid
Convert cents to dollars first. 1 mark each
Q2.1 750 shares, dividend 32 cents per share.
Q2.2 1800 shares, dividend 15 cents per share.
3. Dividend yield
Give answers correct to 2 decimal places. 1 mark each
Q3.1 A share trades at $8.80 and pays a dividend of 44 cents.
Q3.2 A share trades at $6.00 and pays a dividend of 21 cents.
4. The reverse direction
You are given the yield and asked for the price. 2 marks
Q4.1 A share pays a dividend of 33 cents and has a dividend yield of 5.5%. Find its market price.
How did this worksheet feel?
What I'll revisit before next class:
Q1.1 to Q1.4
Dividend paid = number of shares × dividend per share. Dividend yield = (dividend per share ÷ current market price) × 100%. The dividend PAID uses the number of shares; the YIELD does not, because a percentage cannot depend on how many you own. The yield uses the price today; only capital growth uses the price you paid.
Q2.1
750 × $0.32 = $240.00
Q2.2
1800 × $0.15 = $270.00
Q3.1
0.44 ÷ 8.80 × 100% = 5.00%
Q3.2
0.21 ÷ 6.00 × 100% = 3.50%
Q4.1
Rearrange the yield formula: price = dividend ÷ yield = 0.33 ÷ 0.055 = $6.00 [2]. Check: 0.33 ÷ 6.00 = 0.055 = 5.5%.