Question

1. Which one of the following best describes the two components of an HPR for a stock?

		a.Capital gains yield and coupon yield
		b.Capital gains yield and dividend yield
		c.Dividend and APR
		d.Dividend yield and coupon yield
		e.Coupon yield and APR
		Capital gains yield and APR

2. Which one of the following averages is the best estimate of future expected monthly returns?

		a.Dollar-weighted average monthly return
		b.Arithmetic average monthly return
		c.APR
		d.Geometric average monthly return
		e.HPR
		f.EAR

Answer 1

1. B. Two components are Capital gains yield and dividend yield.

The holding period return is used for calculating the return on an investment over multiple periods. The holding period return on a stock is equal to the capital gain yield over the period plus the dividend yield.

There are two components to calculating any holding period return on a stock

a. Price appreciation

b. Cash flow from dividends

2. D Geometric average monthly return which is used for compounded investments. The geometric mean is the montly average return that if applied each perios, would produce a final dollar amount equivalent to the actual final value added monthly index