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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Introduction to Investment

Mr. Iyer invested Rs 50,000 in a stock. After one year it was worth Rs 54,000 and he also received a dividend of Rs 1,000. What is his holding period return?

The holding period return is 10%. The total gain is Rs 4,000 of price appreciation plus Rs 1,000 of dividend, which is Rs 5,000, and dividing this by the initial Rs 50,000 investment gives 10%. Leaving out the dividend would wrongly give 8%.

  1. A8%
  2. B10%Correct
  3. C2%
  4. D12%

Explanation

Holding period return = (ending value - beginning value + income) / beginning value = (54,000 - 50,000 + 1,000) / 50,000 = 5,000/50,000 = 10%. Ignoring the dividend gives 8%, which is the key wrong answer. Check: 50,000 x 1.10 = 55,000 = 54,000 + 1,000.

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