Question

Josh purchased 200 shares of HAR stock at $25.30 per share and sold it 9 months later for $27.20. HAR does not pay a dividend. At the same time, he bought 500 shares of WIG for $9.15 a share. He sold WIG for $9.65 one year later. During the year, WIG paid 4 quarterly dividends of $0.07 each. The most useful way to compare the holding period returns on these stocks is to

A.

Divide the 1 year return on WIG by 9/12.

B.

Multiply the 9 month return on HAR by 12/9.

C.

Divide the 9 month return on HAR by 9/12.

D.

The two holding period returns cannot be compared.

Answer #1

**Solution :**

None of the given options are correct.

The holding period returns from both the stock can be compared.

However, the returns on these stocks can be compared by finding out the annualized return or holding period return for each of these stocks.

Formula :

(Dividend+ Increment or decrease in the value of the share during the period) divided by initial value of the share.

Note : Increment value or decrease in value can be computed as follows :

Current Value of the share - initial value of the share.

An investor purchased 400 shares of a company at $30 per share.
The stock was bought on 65 percent margin (35 percent of the
purchase amount was borrowed). One month later, the investor had to
pay interest on the amount borrowed at a rate of 3 percent per
month. At that time, the investor received a dividend of $0.50 per
share. Immediately after receiving the dividend, he sold the shares
at $35 per share. The investor paid total commissions of...

An investor purchased 400 shares of a company at $30 per share.
The stock was bought on 65 percent margin (35 percent of the
purchase amount was borrowed). One month later, the investor had to
pay interest on the amount borrowed at a rate of 3 percent per
month. At that time, the investor received a dividend of $0.50 per
share. Immediately after receiving the dividend, he sold the shares
at $35 per share. The investor paid total commissions of...

An investor purchased 300 shares of a company at $25 per share.
The stock was bought on 70 percent margin (30 percent of the
purchase amount was borrowed). One month later, the investor had to
pay interest on the amount borrowed at a rate of 3 percent per
month. At that time, the investor received a dividend of $0.6 per
share. Immediately after receiving the dividend, he sold the shares
at $38 per share. The investor paid total commissions of...

Hiral bought 10,000 shares of LuLu at $40 per share, with an
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Two years later he sold the stock for $80 per share. LuLu declared
and paid a special dividend of $4 per share during the period Hiral
held the stock. What was Hiral's holding period return?
100%
150%
167%
183%

On February 20, you bought shares of stock in Microsoft (MSFT),
at $107.15 per share. One quarter later, in mid-May, you sold your
shares at a price of $126.02/share. An instant before the sale, you
received a dividend of $0.46/share.1 a. (i) Compute the total (or
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Jason bought 100 shares of ABC Co. stock for $58.00 per share on
65% margin. The maintenance margin is 30%. Assume he holds the
stock for three months and that his interest costs will be 9% per
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5%?

1. Louis purchased 300 shares of stock on margin for $22.15 a
share and sold the shares eleven months later for $24.50 a share.
The initial margin requirement was 75 percent and the maintenance
margin was 30 percent. The interest rate on the margin loan was 8.5
percent. He received no dividend income. What was his holding
period return?
Multiple Choice
8.45 percent
9.88 percent
10.76 percent
7.05 percent
11.56 percent
2.
You purchased six put option contracts with a...

Mr. Dow bought 100 shares of stock at $19 per share. Three years
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Josh purchased 100 shares of XOM at the beginning of 2016. He
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A.
35%
B.
13.1%
C.
6.2%
D....

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