NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Investments
An investor buys a share at Rs 200 and receives a dividend of Rs 8 during the year. At year-end the share price is Rs 220. What is the total holding period return?
The holding period return is 14%. The capital gain of Rs 20 plus the dividend of Rs 8 gives Rs 28, and dividing this by the purchase price of Rs 200 gives 14%. Ignoring the dividend would understate the return.
- A10%
- B14%Correct
- C4%
- D18%
Explanation
Total return = (price gain + dividend) / opening price = (20 + 8) / 200 = 14%. Option 10% counts only capital gain and ignores the dividend. Option 4% counts only the dividend yield. Option 18% wrongly adds the two percentages with an error in base.
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