which of the following statements best describes how a change in a firm’s stock price would affect a stock’s capital gains yield?
Which of the following statements best describes how a change in a firm’s stock price would affect a stock’s capital gains yield?
Answer:
When there is a change in a firm’s stock price, it directly affects the stock’s capital gains yield. Capital gains yield refers to the increase in the value of an investment or asset over time. If the stock price of a firm rises, the capital gains yield for that stock will also increase. Conversely, if the firm’s stock price decreases, the capital gains yield will decrease as well. Capital gains yield is calculated as the increase in the price of the stock divided by the original price of the stock, multiplied by 100 to express it as a percentage. Therefore, a higher stock price will result in a higher capital gains yield, indicating a better return on investment for shareholders. On the other hand, a decrease in stock price would lead to a lower capital gains yield, affecting the profitability of the investment.