This year, on advice from your sister, you bought tobacco company stock at $50/share. During the year, you collected an $8 dividend, but due to the company's losses in medical lawsuits its stock fell to $40/share. At this point, you sell, realizing a:
A) dividend yield of -16% and a capital loss of 20%.
B) dividend yield of 16% and a capital loss of 20%.
C) dividend loss 10%.
D) capital loss of 10%.
E) total loss of 20%.

Question

Quizplus · Accepted Answer

Dividend yield = (Dividend/Original Share Price) x 100%
Dividend yield = ($8/$50) x 100% = 16%
Capital loss = ((Selling Price - Original Price)/Original Price) x 100%
Capital loss = (($40 - $50)/$50) x 100% = -20%
Therefore, the answer is B: dividend yield of 16% and a capital loss of 20%.

This Year, on Advice from Your Sister, You Bought Tobacco