Question

Stacy purchased a stock last year and sold it today for $4 a share more than her purchase price. She received a total of $1.15 per share in dividends. Which one of the following statements is correct in relation to this investment?
A. The dividend yield is expressed as a percentage of the selling price.
B. The capital gains yield is positive.
C. The capital gain would have been less had Stacy not received the dividends.
D. The dividend yield is greater than the capital gains yield.
E. The total dollar return per share is $3.

Answer 1

Answer: B. The capital gains yield is positive.

Explanation:

The Capital Gains Yield is a percentage figure that tells how much an investment has increased in price from it's acquisition.

It works by taking the new value and dividing it by the original value.

Using Stacy as an example, the Stock increased by $4 so assuming she bought the stock for even $0.1 then her Capital Yield is,

= 4/0.1

= 40 * 100%

= 4000% which is positive

As long as the stock was sold for more than it was bought, Capital Yield Gain is positive.