USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You purchased 100 shares of GE common stock on January 1, for $29 a share. A year later you received $1.25 in dividends per share and you sold it for $28 a share.
-Refer to Exhibit 1.7. Calculate your holding period yield (HPY) for this investment in GE stock.
A) -0.0345
B) -0.0090
C) 0.0086
D) 0.0643
E) 0.0804

Question

Quizplus · Accepted Answer

The holding period yield (HPY) can be calculated as the income plus the capital gain (or loss) divided by the initial investment. Here, the income is $1.25 per share, and the capital loss is $1 per share ($29 - $28). So, for 100 shares, the total income is $125, and the total loss is $100. The initial investment is $29 * 100 = $2900. Thus, HPY = ($125 - $100) / $2900 = $25 / $2900 = 0.00862, which rounds to 0.0086.