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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Investing in Stocks

Asha buys a share for Rs 400 and receives a dividend of Rs 20 during the year. She sells it at year end for Rs 440. What is her holding period return?

Her holding period return is 15%. The capital gain is Rs 40 and the dividend is Rs 20, giving a total gain of Rs 60 on an investment of Rs 400. Ignoring the dividend would understate the return at 10%.

  1. A10%
  2. B15%Correct
  3. C5%
  4. D12.5%

Explanation

Holding period return = (sale price - purchase price + dividend) / purchase price = (440 - 400 + 20) / 400 = 60/400 = 15%. Using only capital gain gives 10%, which misses the dividend. 5% is the dividend yield alone. 12.5% does not follow from the data.

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