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 8 during the year and sells it at Rs 220 at the end of the year. What is the holding period return?
The holding period return is 14%. The gain is Rs 20 of price appreciation plus Rs 8 of dividend, a total of Rs 28, which divided by the Rs 200 purchase cost gives 14%. Ignoring the dividend would wrongly give 10%.
- A10%
- B14%Correct
- C4%
- D12%
Explanation
Holding period return = (sale price - purchase price + dividend) / purchase price = (220 - 200 + 8) / 200 = 28/200 = 14%. The 10% option ignores the dividend, and the 4% option counts only the dividend yield.
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