Question

You purchased Hobo Hats stock last year for $60 a share. Today, you received $2 a share dividend and immediately sold the stock for $63. Your realized return, or holding period return, was _________.

Answer 1

The realized return or holding period return on the stock is 8.33%

Step-by-step explanation:

The realized return on the share is computed with the below formula:

Realized return=(dividends+capital gains)/initial price of the stock

Dividend paid was $2 a share

Capital gains=Selling price-initial purchase price

Capital gains=$63-$60

Capital gains is $3 a share

Realized return=($3+$2)/$60

Realized gain=0.083333333

Realized gain is 8.33%

This represents the entire return on the stock from date of purchase to the date the shares were disposed of.

Answer 2

8.33%

Step-by-step explanation:

Given that

Income = 2

End of period value = 63

Initial value = 62

Recall that,

Holding period return = income + ( end of period value - initial value) ÷ initial value.

Therefore,

HPR = 2 + (63 - 60) ÷ 60

= 2 +( 3) ÷ 60

= 5 ÷ 60

= 0.0833

OR

= 8.33 %