Lila purchased Hampton Industries Inc.stock for $18.35 and sold it 6 months later for $21.45 after receiving a $0.50 dividend.What was her holding period return (HPR),Annual Percentage Rate (APR),and Effective Annual Rate (EAR)?

Question

Quizplus · Accepted Answer

Holding Period Return (HPR) = (Ending price + Dividend - Beginning price) / Beginning price
HPR = (21.45 + 0.5 - 18.35) / 18.35
HPR = 0.1962 or 19.62%

Annual Percentage Rate (APR) = (1 + HPR)^(365/183) - 1
APR = (1 + 0.1962)^(365/183) - 1
APR = 0.3924 or 39.24%

Effective Annual Rate (EAR) = (1 + APR/365)^365 - 1
EAR = (1 + 0.3924/365)^365 - 1
EAR = 0.4309 or 43.09%

Therefore, the best choice is C with HPR of 19.62%, APR of 39.24%, and EAR of 43.09%.

Lila Purchased Hampton Industries Inc