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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Investing in Stocks (NISM XXI-A)

A stock is bought at ₹500. Over the year it pays a dividend of ₹10 and the price at year end is ₹560. What is the total return for the year?

The total return is 14%. Capital appreciation of ₹60 (560 minus 500) plus the dividend of ₹10 gives ₹70, and dividing by the purchase price of ₹500 yields 14%. Counting only the price gain would understate the return at 12%.

  1. A12%
  2. B14%Correct
  3. C10%
  4. D2%

Explanation

Total return = (price gain + dividend) / purchase price = (60 + 10) / 500 = 70/500 = 14%. The 12% figure counts only the capital gain, ignoring the dividend. 2% is the dividend yield alone as a share of the price (10/500), not the total return. 10% is wrong because it does not reconcile with any component of the data.

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