CMA Intermediate · Financial Management and Business Data Analytics · Risk and Return
An investor buys a share of Kaveri Textiles Ltd. for ₹200, receives a dividend of ₹10 during the year and sells it at year-end for ₹230. What is the holding period return?
The holding period return is 20%. Total gain is the dividend of ₹10 plus the capital gain of ₹30, which is ₹40, divided by the initial investment of ₹200. Ignoring the dividend would give 15%, which understates the total return.
- A15%
- B20%Correct
- C5%
- D25%
Explanation
Holding period return = (dividend + price change) / opening price = (10 + 30) / 200 = 20%. The option 15% ignores the dividend and counts only capital gain (30/200). The option 5% counts only the dividend (10/200).
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