NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Investment Landscape
Mr. Iyer bought a bond for Rs 1,000 and received Rs 80 as interest during the year. At year end, he sold the bond for Rs 1,020. What is his holding period return?
The holding period return is 10%. Interest of Rs 80 plus a capital gain of Rs 20 gives total gain of Rs 100 on an investment of Rs 1,000. Ignoring either the interest or the price gain would understate the return.
- A8%
- B2%
- C10%Correct
- D12%
Explanation
Total return = interest Rs 80 + capital gain Rs 20 (1,020 - 1,000) = Rs 100. Dividing by the initial investment of Rs 1,000 gives 10%. The 8% option ignores the capital gain, and the 2% option ignores the interest.
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