Question

Which of the foliowing statements regarding holding period return is true?

a) Holding period relums are meatured on an annual basis
b) Another name for holding benod retum is eupecied retum
c) Holding period retuma are awaym inss than expeched retums because holdng perisd returns are delenmined at the end of the period and muat be dibcourted beck to prevent value
d) Holding period retum is dollar amount gained per dollar invesiod

Answer 1

The correct statement is that holding period return refers to the dollar amount gained per dollar invested. It incorporates income and capital gains during the holding period of an investment.

Step-by-step explanation:

The question is about the concept of holding period return in finance. The holding period return is the total return on an investment over the period it was held, which can be comprised of capital gains and dividends or interest earned during the period. It is important to note that the holding period return is not necessarily measured on an annual basis, nor is it synonymous with expected return, which is an anticipation of future returns based on probability distributions and cannot be determined until the end of the period.

Statement (d), "Holding period return is dollar amount gained per dollar invested," is correct. It calculates the total return on investment, including income from dividends, interest, and realized capital gains relative to the initial investment amount.