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 $95. What was your dividend yield and capital
gains yield on the investment?
A) 2%, -5%
B) 2%, 5%
C) -2%, 5%
D) 5%, 2%

Answer 1

Answer:

A) 2%, -5%

Explanation:

The computations are shown below:

Dividend yield = (Annual yield) ÷ (market price) × 100

where,

Market price = $95 per share

Annual dividend = $2 per share

So, the dividend yield = ($2 per share ÷ $95 per share) × 100

= 2%

Capital gain yield = (Market price - purchase price) ÷ (purchase price) × 100

                             = ($95 - $100) ÷ ($100) × 100

                             = -5%

We assume the purchase price is 100