Question

You purchased a share of stock for $120. One year later you received $1.82 as a dividend and sold the share for $136. What was your holding-period return

Answer 1

Holding period return =14.85 %

Step-by-step explanation:

The return on stock is the sum of the dividends earned and capital gains made during the holding period of the investment.

Dividend is the proportion of the profit made by a company which is paid to shareholders.

Capital gains is another type of the return made on an equity investment as a result of increase in the value of the shares. It is difference between the cost of the share and the value at the time of disposal.

Therefore, we can can compute the return on the investment as follows:

Holding period return = (Dividend + capital gain)/Begin Price of stock × 100

Dividend = $1.82

Capital gains= 136 - 120 = 16

Total dollar return on Investment = 1.82 + 16= $ 17.82

= 17.82/120 × 100 = 14.85 %

Holding period return =14.85 %