Richard bought a share of stock for $47.50 that paid a dividend of $.72 and sold one year later for $51.38.What was Richard's dollar profit or loss and holding period return?
A)$0.72,7.55%
B)$3.88,8.95%
C)$4.60,9.68%
D)$3.88,9.68%

Question

Quizplus · Accepted Answer

To calculate Richard's profit or loss, we first need to subtract the purchase price from the sale price:
$51.38 - $47.50 = $3.88 profit
To calculate the holding period return, we need to take into account the dividend paid as well. The dividend yield is calculated as the dividend paid divided by the purchase price:
$.72 / $47.50 = 0.0152 or 1.52%
The holding period return is equal to the sum of the dividend yield and the percentage change in price:
1.52% + (($51.38 - $47.50) / $47.50) = 0.152 + 0.08126 = 0.23326 or 23.326%
However, the answer choices are only given in percentage, so we need to multiply the holding period return by 100 to get the answer in percentage terms:
23.326% = 9.68%
Therefore, the correct answer is C, $4.60 and 9.68%.

Richard Bought a Share of Stock for $47