NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Introduction to Securities Markets
An investor buys a share at Rs 400, receives a dividend of Rs 12 during the year and sells it at Rs 436 at year end. What is the holding period return, ignoring taxes and costs?
The holding period return is 12%. Capital gain is Rs 36 (436 minus 400) and the dividend is Rs 12, giving a total gain of Rs 48 on an investment of Rs 400. Dividing 48 by 400 gives 12%.
- A9.0%
- B12.0%
- C3.0%
- D10.0%Correct
Explanation
Capital gain = 436 - 400 = Rs 36. Add dividend Rs 12 to get total gain Rs 48. Return = 48/400 = 12%. Check: 12% of 400 = 48. Hence the correct figure is 12%. The 9% option counts only the capital gain (36/400), and 3% counts only the dividend (12/400).
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