Question

At the beginning of last year Mr. Gaurav Sharma invested Rs. 1,50,000 in 100 shares of wipro limited. During the year, wipro paid dividends of Rs. 120 per share. At the end of the year Mr. Sharma sold the 100 shares for Rs. 1600 per share. Compute the total HPY on these shares and indicate how much was due to price change and how much was due to dividend income

Answer 1

The total Holding Period Yield (HPY) on the shares is Rs. 22,000, with Rs. 12,000 due to dividend income and Rs. 10,000 due to price change.

Step-by-step explanation:

To calculate the total Holding Period Yield (HPY) on the shares, we need to compute the dividend income and the price change.

Dividend income is calculated by multiplying the number of shares (100) by the dividend paid per share (Rs. 120). The dividend income can be calculated as follows:

Dividend Income = Number of Shares * Dividend per Share = 100 * Rs. 120 = Rs. 12,000.

The price change can be calculated by subtracting the initial purchase price per share from the selling price per share and then multiplying it by the number of shares:

Price Change = (Selling Price per Share - Initial Purchase Price per Share) * Number of Shares = (Rs. 1600 - Rs. 1500) * 100 = Rs. 10,000.

The total HPY is the sum of the dividend income and the price change:

Total HPY = Dividend Income + Price Change = Rs. 12,000 + Rs. 10,000 = Rs. 22,000.