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

Ravi Menon bought 200 shares of an Indian company at Rs 400 per share. After one year, the company paid a dividend of Rs 12 per share and the share price rose to Rs 440. Ignoring taxes and transaction costs, what is Ravi's holding period return for the year?

The holding period return is 13.0%. The price gain is Rs 40 and the dividend is Rs 12, together Rs 52 on an initial price of Rs 400. Dividing 52 by 400 gives 13%. Counting only the price appreciation would understate the return at 10%.

  1. A10.0%
  2. B13.0%Correct
  3. C3.0%
  4. D12.0%

Explanation

Capital gain = 440 - 400 = Rs 40; dividend = Rs 12; total = Rs 52. Return = 52/400 = 13.0%. Check: 200 shares x 52 = Rs 10,400 over Rs 80,000 = 13%. Ignoring the dividend gives 10%, which is wrong because total return includes income.

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