NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Investment Landscape
An investor bought an equity asset for Rs 80 and received a dividend of Rs 4 during the year. At year end the price was Rs 90. What is the holding period return?
The holding period return is 17.5%. The investor gained Rs 10 from price appreciation and Rs 4 from dividend, totalling Rs 14 on an initial outlay of Rs 80. Ignoring the dividend gives 12.5%, which understates the total return.
- A12.50%
- B5.00%
- C17.50%Correct
- D15.00%
Explanation
Return = (price gain 10 + dividend 4) / 80 = 14/80 = 17.5%. 12.5% ignores the dividend, 5% is dividend yield only, and 15% divides total by a wrong base of about 93.
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