Question

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%

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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