Question

Nico bought 100 shares of cisco systems stock for $30.00 per share on january 1, 2013. he received a dividend of $2.00 per share at the end of 2013 and $3.00 per share at the end of 2014. at the end of 2015, nico collected a dividend of $4.00 per share and sold his stock for $33.00 per share. what was nico's realized holding period return?

Answer 1

Nico's realized holding period return on his Cisco Systems stock was 40%. This was calculated by combining the dividends received and the capital gain from the sale of the stock, divided by the initial investment.

Step-by-step explanation:

Calculating Realized Holding Period Return

To calculate Nico's realized holding period return on his investment in Cisco Systems stock, we need to consider his initial investment, the dividends received, and the selling price of the stock. Initially, Nico bought 100 shares at $30.00 each, amounting to a total investment of $3,000. Over the holding period, he received dividends as follows: $2.00 per share in 2013, $3.00 per share in 2014, and $4.00 per share in 2015, totaling $9.00 per share or $900 for 100 shares. Upon selling the stock at the end of 2015 for $33.00 per share, Nico received $3,300.

Now, let's calculate the realized holding period return:

• Total dividends received: 100 shares x ($2 + $3 + $4) = $900
• Capital gain from sale: (Selling price per share - Purchase price per share) x Number of shares = ($33 - $30) x 100 = $300
• Total return: Dividends received + Capital gain = $900 + $300 = $1,200
• Realized holding period return: (Total return / Initial investment) x 100 = ($1,200 / $3,000) x 100 = 40%

Nico's realized holding period return on his Cisco Systems stock investment was 40%.

Answer 2

Jan. 1, 2013:
Initial investment = (100 shares)*($30/share) = $3,000.

End of 2013:
Dividend collected = ($2/share)*(100 shares) = $200

End of 2014:
Dividend collected = ($3/share)*(100 shares) = $300

End of 2015:
Dividend collected = ($4/share)*(100 shares) = $400

Returns::
From sales of 100 shares = ($33/share)*(100 shares) = $3,300
From dividends = 200 + 300 + 400 = $900
Total returns = 3,300 + 900 = $4,200

Realized returns = Total returns - Initial inestment
= 4200 - 3000
= $1,200

Answer: $1,200