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
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%.