When evaluating your portfolio at last year's end, you notice that the value of your portfolio was $100,000. The value of your portfolio at this year's end is $112,000, and you received cash dividends of $1,000 at the end of the first six months of this year and $1,200 in cash dividends at year end. The total return and the holding period yield (i.e., internal rate of return) are closest to:
A) 13.2 percent and 13.73 percent, respectively
B) 13.2 percent and 13.79 percent, respectively
C) 14.2 percent and 13.73 percent, respectively
D) 14.2 percent and 13.79 percent, respectively

Question

Quizplus · Accepted Answer

The total return is calculated as (Ending Value - Beginning Value + Dividends) / Beginning Value = ($112,000 - $100,000 + $1,000 + $1,200) / $100,000 = 14.2%. The holding period yield (IRR) accounts for the timing of cash flows and is approximately 13.79%.

When Evaluating Your Portfolio at Last Year's End, You Notice