NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Introduction to Securities Markets
An investor buys shares of an Indian company at Rs 200 per share, receives a dividend of Rs 10 per share during the year, and sells at Rs 230 per share at year end. What is the holding period return, ignoring taxes and costs?
The holding period return is 20%. The capital gain of Rs 30 plus the dividend of Rs 10 gives a total gain of Rs 40, which divided by the purchase price of Rs 200 equals 20%. Ignoring the dividend gives only 15%.
- A15%
- B20%Correct
- C10%
- D25%
Explanation
Total return = capital gain (230 - 200 = 30) + dividend (10) = Rs 40. Divided by the purchase price of Rs 200, this gives 20%. Choosing 15% counts only the capital gain, omitting the dividend.
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