Q:
John purchased 100 shares of XYZ stock for $50 per share. He held the stock for one year then sold the 100 shares for $60 per share. During the time he owned the stock it paid a $1.50 dividend per share. What was John’s Holding Period Return?
a) 21 percent
b) 23 percent
c) 27 percent
d) 25 percent
A:
The correct answer is b.
The Holding Period Return (HPR) is the total return (income, dividends, plus capital appreciation less margin interest) over the entire period dividend by the price of the investment. In the example above, $6,000 (proceeds) + $150 (dividend) - $5,000 (cost) divided by $5,000 (cost) equals 23%.

RELATED FAQS

  1. Cousin Eddie purchased 250 shares of WES stock for $10,000. One year later ...

    The correct answer is a) For equity investments, the total return is
  2. Why do some preferred stocks have a higher yield than common stocks?

    Before we answer this question, let's just take a quick review of what a stock's yield is actually measuring.The yield is ...
  3. What can cause the marginal propensity to consume to change over time?

    Learn about the dividend payout ratio and dividend yield, what the ratios measure and the difference between the dividend ...
  4. Which is more important - dividend yield or total return?

    Learn to distinguish between those times when dividend yield or total return is a more useful performance metric for a company's ...
  5. What is the difference between yield and dividend?

    Learn how to differentiate between dividend yield and dividend return, and see why dividend yield is the more popular rate ...
  6. Which of the following is not a reason why a company might issue a stock dividend ...

    The correct answer is d. All of these are reasons for a company to issue a stock dividend, remember that this differs from ...
RELATED TERMS
  1. Holding Period Return/Yield

    The total return received from holding an asset or portfolio ...
  2. Total Return

    When measuring performance, the actual rate of return of an investment ...
  3. Dividend Yield

    A financial ratio that shows how much a company pays out in dividends ...
  4. Stock Dividend

    A dividend payment made in the form of additional shares, rather ...
  5. Dividend Adjusted Return

    When a stock's return is calculated using not only the stock's ...
  6. Indicated Yield

    The dividend yield that a share of stock would return based on ...
Hot Definitions
  1. Quadruple Witching

    The expiration date of various stock index futures, stock index options, stock options and single stock futures. All stock ...
  2. Co-pay

    A type of insurance policy where the insured pays a specified amount of out-of-pocket expenses for health-care services such ...
  3. Protectionism

    Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local ...
  4. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  5. Demonetization

    Demonetization is the act of stripping a currency unit of its status as legal tender and is necessary whenever there is a ...
  6. Investment

    An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic ...
Trading Center