Question

You are considering two investment alternatives. The first is a stock that pays quarterly dividends of ​$0.38 per share and is trading at ​$25.83 per​ share; you expect to sell the stock in six months for ​$29.25. The second is a stock that pays quarterly dividends of ​$0.64 per share and is trading at ​$30.94 per​ share; you expect to sell the stock in one year for ​$33.53. Which stock will provide the better annualized holding period​ return? The​ 1-year HPR for the first stock is nothing​%. ​

Answer 1

Answer:

The​ 1-year HPR for the first stock is 16.18%

Explanation:

The computation is shown below:

For investment 1 -

The formula is shown below:

= (Income × quarter ) +Value at the end  - Value at the beginning  ÷ (Value at the beginning) × 100

= {($0.38 × 2) + $29.25 - $25.83} ÷ ($25.83) × 100

= ($0.76 +  $29.25 - $25.83) ÷ ($25.83)  × 100

= ($4.18 ÷ $25.83)  × 100

= 16.18%