Question

Suppose you invested $100 in the Ishares High Yield Fund (HYG) a month ago. It paid a

dividend of $2 today and then you sold it for $100. What was your dividend yield and capital
gains yield on the investment?
A) 2%, 2%
B) 0%, 2%
C) 3%, 2%
D) 2%, 0%

Answer 1

D) 2%, 0%

Step-by-step explanation:

Dividend yield is the percentage of the share price that was paid as dividends:

`DY = (dividends)/(share \ price)\\DY=(2)/(100)=2\%`

Capital gains yield is the percentage increase in the share price after a period. Since, in this case, the initial and final share price are both $100 there was no capital gains yield, CGY = 0%.

Therefore, the answer is D) 2%, 0%