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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 Rs 250. During the year it pays a dividend of Rs 5 per share and the price at year end is Rs 280. What is the total holding period return?

The total holding period return is 14%. The investor earned a capital gain of Rs 30 and a dividend of Rs 5, totalling Rs 35 on an investment of Rs 250. Ignoring the dividend would understate the return at 12%.

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

Explanation

Capital gain = 280 - 250 = Rs 30; dividend = Rs 5; total = Rs 35. Return = 35/250 = 14%. Counting only the capital gain gives 12%; counting only the dividend yield gives 2%.

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