CFA Level I · CFA Level I Exam · Returns of Financial Assets and Instruments
An investor buys a share for 50.00, receives a dividend of 2.00 at the end of the year, and sells the share for 54.00. The holding period return is closest to:
The holding period return is 12.0%. Capital gain of 4.00 plus the 2.00 dividend gives a total gain of 6.00, which divided by the initial price of 50.00 equals 0.12. Ignoring the dividend would understate the return at 8.0%.
- A8.0%
- B10.0%
- C12.0%Correct
Explanation
HPR = (54 − 50 + 2)/50 = 6/50 = 12.0%. The 8.0% option ignores the dividend, counting price change only (4/50). The 10.0% option is a different mistake and does not match the data.
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