Aardvark,Inc.pays a constant annual dividend.At the end of trading on Wednesday,the price of its stock was $28.At the end of trading on the following day,the stock price was $27.As a result of the decline in the stock's price,the dividend yield _____ while the capital gains yield ____.

Question

Quizplus · Accepted Answer

The dividend yield is calculated by dividing the annual dividend per share by the current stock price. Since the annual dividend is constant and the stock price decreased, the dividend yield must have increased (as the denominator decreased). The capital gains yield is calculated by dividing the change in stock price by the original stock price. In this case, the change in stock price is negative and the original stock price is $28, so the capital gains yield must have remained constant. Therefore, the correct answer is B) increased; remained constant.