NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Investments
An investor buys a share at Rs 200, receives a dividend of Rs 10 during the year, and sells it at Rs 230 at the end of the year. What is the holding period return?
The holding period return is 20%. Total gain is the Rs 30 price appreciation plus the Rs 10 dividend, which equals Rs 40, and dividing this by the original cost of Rs 200 gives 20 per cent.
- A15%
- B20%Correct
- C12.5%
- D5%
Explanation
Holding period return = (sale price - purchase price + income) / purchase price = (230 - 200 + 10) / 200 = 40/200 = 20%. Ignoring the dividend gives 15%, which is the capital gain alone and is therefore wrong.
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