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

A stock's price rises from ₹200 to ₹250 over one year during which it pays a dividend of ₹10 per share. A second stock moves from ₹500 to ₹560 with a dividend of ₹20. Which statement about total return is correct?

Stock one earned 30% and stock two earned 16%. Total return equals price gain plus dividend divided by the opening price: (50+10)/200 and (60+20)/500. Ignoring dividends would understate returns at 25% and 12%.

  1. AStock one earned 30% and stock two earned 16%Correct
  2. BStock one earned 25% and stock two earned 12%
  3. CStock one earned 30% and stock two earned 12%
  4. DStock one earned 25% and stock two earned 16%

Explanation

Stock one: (50 + 10) / 200 = 30%. Stock two: (60 + 20) / 500 = 16%. Options with 25% and 12% leave out the dividends, which are part of total return.

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