Question

Automaton, Inc.'s current stock price is $57. Analysts forecast a price of $45 in one year. Automaton's Beta is 1.2. The Risk-Free Rate is 3% and Return of the Market Portfolio is 7%. Assuming Automaton pays a $5 dividend at the end of the year, what is the Holding Period Return?

Answer 1

-12.28%

Step-by-step explanation:

Holding period return is the total return on an investment in the period when the investment is held by an investor.

Holding period return = price appreciation + dividend yield

price appreciation = (price in on year - initial price) / initial price

(45 - 57) / 57 = -0.21053 = -21.05%

dividend yield = dividend / initial price

$5 / 57 = 0.0877 = 8.77

Holding period return = -21.05% + 8.77 = -12.28%