NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Introduction to Investment
An investor buys a share at Rs 200, receives a dividend of Rs 8 during the year, and sells it at Rs 216 at year end. What is the holding period return?
The holding period return is 12%. The total gain is the Rs 16 capital appreciation plus the Rs 8 dividend, which is Rs 24, divided by the Rs 200 purchase price. Excluding the dividend would understate the return at 8%.
- A8%
- B4%
- C12%
- D10%Correct
Explanation
Holding period return = (sale price - purchase price + income)/purchase price = (216 - 200 + 8)/200 = 24/200 = 12%. Wait: this equals 12%, so the correct choice is Rs 24 gain over Rs 200 = 12%. Ignoring the dividend gives 8%, and ignoring the price gain gives 4%.
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