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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%

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Answer:

D) 2%, 0%

Explanation:

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

[tex]DY = \frac{dividends}{share \ price}\\DY=\frac{2}{100}=2\%[/tex]

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%

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