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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Investing in Stocks

A stock trades at Rs 200 per share, has earnings per share of Rs 10 and pays a dividend of Rs 4 per share. What is its dividend payout ratio and P/E ratio respectively?

The dividend payout ratio is 40 percent and the P/E ratio is 20. Payout is dividend per share Rs 4 divided by earnings per share Rs 10, and P/E is the price Rs 200 divided by earnings per share Rs 10.

  1. A40% and 20Correct
  2. B25% and 50
  3. C40% and 50
  4. D20% and 20

Explanation

Payout ratio = DPS/EPS = 4/10 = 40%. P/E = Price/EPS = 200/10 = 20. Option C uses the wrong P/E by dividing by DPS (200/4 = 50), and option B inverts the payout ratio.

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