NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Investments
An investor buys a share of an Indian company at ₹400, receives a dividend of ₹20 during the year, and sells it at the end of the year for ₹440. What is the holding period return?
The holding period return is 15%. It combines the capital gain of ₹40 and the dividend of ₹20, giving a total gain of ₹60 on an initial investment of ₹400. Ignoring the dividend would wrongly give 10%.
- A10%
- B15%Correct
- C5%
- D12.5%
Explanation
Holding period return = (sale price − purchase price + dividend) / purchase price = (440 − 400 + 20)/400 = 60/400 = 15%. The 10% option ignores the dividend and counts only the capital gain. The 5% option counts only the dividend.
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