What is the difference between yield and total return?

• A. Yield is the income component (dividends or interest) as a percentage of price; total return includes income plus capital gains or losses over a period.
• B. Yield equals capital gains only.
• C. Total return excludes dividends.
• D. Yield and total return are identical.

Answer: (A)

In investing, yield measures the cash income you receive from the investment as a percentage of its price, such as dividends for stocks or interest for bonds. Total return, on the other hand, includes both that income and any price changes (capital gains or losses) over the period, giving the full picture of performance.

For example, if a stock pays a $2 dividend and starts the period at $50, the yield is 2/50 = 4%. If the price ends at $55, the capital gain is $5, so total return is (dividend + price change) / initial price = (2 + 5) / 50 = 14%.

So yield focuses on income alone, while total return combines income with price movement to show overall performance. The other statements are incorrect because yield is not capital gains only, total return does include dividends, and yield and total return are not the same.