NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Investments
An investor buys a share at ₹400, receives a dividend of ₹20 during the year and sells it at ₹440 at the end of the year. What is the holding period return?
The holding period return is 15%. It is the capital gain of ₹40 plus the dividend of ₹20, giving ₹60 total gain, divided by the initial investment of ₹400. Ignoring the dividend would wrongly give 10%.
- A10%
- B5%
- C15%Correct
- D20%
Explanation
Holding period return = (Ending price − Beginning price + Dividend) / Beginning price = (440 − 400 + 20)/400 = 60/400 = 15%. Taking only the capital gain gives 10%, which ignores the dividend. Taking only the dividend gives 5%.
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