Shares (1 Viewer)

[bmn]

Hi, i'm doing a multiple choice and the answer i'm getting is not the answer that is suggested, and it doesn't show how it got to the answer so could someone please explain this one...

Patrick bought 800 fifty cent shares in TNT for $3.65 per share. What annual income did he receive when the company declared a 17.5% dividend?

 

[bmn]

lolz i just realised its a dumb question

Patrick bought 800 fifty cent shares in TNT for $3.65 per share. What annual income did he receive when the company declared a 17.5% dividend?

how can he buy 800 fifty cent shares for $3.65........then again, i could still be wrong :S

 

[PC]

There are a couple of terms here to remember.
The face value of a share is the nominal amount that is literally written on the share. In this case the face value of the share is 50 cents.
The market value of a share is the price which someone might be willing to pay for that share. In this case the market value of the share is $3.65.

A good analogy might be rare bank notes. The first ever plastic $10 note has a face value of $10, but one in pristine condition now sells for around $20. So it's market value differs from its face value.

Anyway, the question.

Total value of shares = 800 x 3.65 = $2920
Dividend yield = 17.5%
Dividend = 17.5% of $2920 = 0.175 x 2920 = $511

The face value of 50 cents isn't required in the question.

 

[bmn]

according to answers, answer is $70

 

[PC]

Ah.

Could be from an old MIS paper. They used to distinguish between "dividend" and "yield". Dividend was related to face value and Yield was related to market value.

In the General course now, we just need to know "dividend yield".