NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Investing in Stocks
Ravi bought a share of an Indian company for Rs 400. During the year he received dividends of Rs 12 per share, and at year-end he sold it for Rs 440. What is his holding period return?
The holding period return is 13%. Capital gain is Rs 40 (440 minus 400) and dividend is Rs 12, giving total gain of Rs 52. Dividing by the purchase price of Rs 400 gives 0.13, or 13%. Excluding the dividend would understate the return at 10%.
- A10.0%
- B13.0%Correct
- C3.0%
- D12.0%
Explanation
Holding period return = (Sale price - Purchase price + Dividend) / Purchase price = (440 - 400 + 12)/400 = 52/400 = 13%. Ignoring the dividend gives 10%. Dividing the dividend alone by price gives 3%. Using 440 as the base gives 11.8%, which is not offered.
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