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

An investor bought a share at Rs 400, received a dividend of Rs 10 during the year and sold the share at Rs 440. What is the holding period return?

The holding period return is 12.5%. The investor earned a capital gain of Rs 40 plus a dividend of Rs 10, totalling Rs 50 on an initial investment of Rs 400. Dividing 50 by 400 gives 12.5%, so ignoring the dividend would understate the return.

  1. A10.0%
  2. B12.5%Correct
  3. C2.5%
  4. D7.5%

Explanation

Total gain = capital gain (440 - 400 = 40) + dividend 10 = Rs 50. Return = 50 / 400 = 12.5%. Ignoring the dividend gives 10%, the dividend alone gives 2.5%.

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