Question

In order to calculate an investor's holding period return, which of the following is necessary to know?

A) The value of the portfolio at the beginning of the period.
B) The value of the portfolio at the end of the period.
C) Income received during the period.
D) Capital appreciation or depreciation over the period.
Options:
A and B only
A, B, and C only
B, C, and D only
A, B, C, and D

Answer 1

To calculate an investor's holding period return, one must know the initial and final values of the portfolio, the income received during the period, and the capital appreciation or depreciation. All components are vital in determining the actual rate of return, which encompasses total returns from capital gains and income sources such as dividends and interest.

Step-by-step explanation:

In calculating an investor's holding period return, it is necessary to know the following:

• The value of the portfolio at the beginning of the period.
• The value of the portfolio at the end of the period.
• Income received during the period, such as dividends or interest.
• Capital appreciation or depreciation over the period.

Therefore, to calculate the holding period return, you need to know all of these components since the return is a combination of both income received during the period and the capital gains or losses on the investment. The actual rate of return represents the total return on investment, reflecting the entire effect of dividends, interest, and capital gains or losses. Therefore, the correct option for the provided question about the necessary information for calculating holding period return would be A, B, C, and D.