The Zolo Co.just declared that it is increasing its annual dividend from $1.00 per share to $1.25 per share.If the stock price remains constant, then:
A)the capital gains yield will decrease.
B)the capital gains yield will increase.
C)the dividend yield will increase.
D)the dividend yield will also remain constant.
E)neither the capital gains yield nor the dividend yield will change.

Question

Quizplus · Accepted Answer

The dividend yield will increase because the annual dividend per share has increased while the stock price remains constant. The capital gains yield is the change in stock price, which in this case is assumed to remain constant. Therefore, the capital gains yield will not change.