Question

Three years ago, you purchased a stock at a price of $33.48. The stock paid annual dividends of $.60 per share. Today, the stock is worth $35.20 per share. What is your holding period return?

Answer 1

10.51%

Explanation:

Data provided in the question:

Period Initial value = $33.48

Period end value = $35.20

Annual dividend paid = $0.60

Total time = 3 years

Therefore,

the total dividend paid i.e the income = 3 × $0.60 = $1.80

Now,

The holding period is given as:

`= \frac{ \textup{Income + end period value - initial period value }}{\textup{initial period value}}*100\%`

=
`\frac{ \textup{1.80 + 35.20 - 33.48}}{\textup{33.48}}*100\%`

=
`\frac{ \textup{3.52}}{\textup{33.48}}*100\%`

= 10.51%