NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Introduction to Securities Markets
An investor buys a share at ₹400 and sells it after one year at ₹460, having received a dividend of ₹20 during the year. What is the total holding period return?
The holding period return is 20%. The capital gain is ₹60 and the dividend is ₹20, giving a total gain of ₹80 on an investment of ₹400. Excluding the dividend would understate the return at 15%, so both income and price change must be counted.
- A15.0%
- B20.0%Correct
- C18.0%
- D5.0%
Explanation
Total return = (sale price - purchase price + dividend) / purchase price = (460 - 400 + 20) / 400 = 80/400 = 20%. Ignoring the dividend gives 15%, which is the capital gain alone. Computing the dividend yield alone gives 5%.
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