You purchased 500 shares of A.M.J.Inc.common stock one year ago for $50 per share.You received a dividend of $2 per share today and decide to take your profits by selling at $54.50 per share.What is your holding period return?
A) 13.0%
B) 9.0%
C) 6.5%
D) 4.0%

Question

Quizplus · Accepted Answer

The holding period return (HPR) is calculated by taking the income and capital gains during the holding period and dividing it by the initial investment. Here, the income is the dividend of $2 per share, and the capital gain is the difference between the selling price ($54.50) and the purchase price ($50), which is $4.50 per share. So, for each share, the total return is $6.50 ($2 + $4.50). The return per share divided by the initial price per share ($50) gives us the holding period return: $6.50 / $50 = 0.13, or 13%.

You Purchased 500 Shares of A