Question

If Stock A had a price of $120 at the beginning of the year, $150 at the end of the year and paid a $6 dividend during the year, what would be the annualized holding period return? (NEED TO SHOW ALL WORK FOR CREDIT)
A. 36%
B. 30%
C. 24%
D. none of the above

Answer 1

Answer:

B. 30%

Explanation:

Initial value (Vi) = $120

Final value (Vf) = $150

Dividends paid (D) = $6

The holding period return is defined as the change in value during the year added to the dividends paid and then divided by the initial value:

$HPR = \frac{D+(V_f-V_i)}{V_i} \\HPR = \frac{6+(150-120)}{120}\\HPR = 0.30\ or\ 30\%$

The stock's annualized holding period return is 30%.