Question

You put up $80 at the beginning of the year for an investment. The value of...

You put up $80 at the beginning of the year for an investment. The value of the investment grows 2% and you earn a dividend of $8.00. Your HPR was ____.

10.0%

12.0%

8.0%

2.0%

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Homework Answers

Answer #1

Holding period return is calculated using the below formula:

HPR= Selling price – purchase price + dividend/ Purchase price

        = Purchase price*(1 + growth rate) - purchase price + dividend/ Purchase price

       = $80*(1 + 0.02) - $80 + $8/ $80

      = $81.60 - $80 + $8/ $80

       = $1.60 + $8/ $80

       = $9.60/ $80

       = 0.12*100

       = 12%.

Hence, the answer is option b.

In case of any query, kindly comment on the solution.

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