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%

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