CMA Final · Strategic Financial Management · Equity and Bond Valuation and Evaluation of Performance
An investor buys a share of Anand Pharma Ltd at ₹250, receives a dividend of ₹10 after one year and sells the share at ₹275. What is the holding period return?
The holding period return is 14%. Total gain is the ₹10 dividend plus the ₹25 capital gain, which is ₹35, and dividing by the purchase price of ₹250 gives 14%.
- A10%
- B14%Correct
- C4%
- D12%
Explanation
Return = (dividend + price change)/opening price = (10 + 25)/250 = 35/250 = 14%. 10% counts only capital gain. 4% counts only dividend yield. 12% wrongly divides total gain by the closing price... that gives 12.73%, so it is incorrect.
Did you get it right without looking?
One question tells you little. A timed set on Equity and Bond Valuation and Evaluation of Performance shows your real accuracy, how long you take and where you lose marks.
More Equity and Bond Valuation and Evaluation of Performance questions
- Mehta Pharma Ltd is expected to pay dividends of Rs 4 in year 1 and Rs 5 in year 2. At the end of year 2 the share is expected to sell for R…
- A zero-coupon bond of face value Rs 1,000 matures in 3 years. The market yield is 10% per annum compounded annually. What is its present val…
- A company's share trades at a price of Rs 150 and has earnings per share of Rs 10. Its industry average price-earnings ratio is 12. Using th…
- Meenakshi Textiles Ltd paid a dividend of Rs 5 per share last year. Dividends are expected to grow at a constant 6% per annum indefinitely. …
- Sagar Foods Ltd has an expected EPS of Rs 12 next year and a retention ratio of 40%. Its return on equity is 15% on all new investments and …
- Bharat Auto Ltd has a current dividend of Rs 4 per share, expected to grow at a constant 5% a year forever. Shareholders require a return of…