Question

You purchased 250 shares of General Motors stock at a price of $77.98 two years ago. You sold all stocks today for $88.67. During this period the stock paid dividends of $5.90 per share. What is your annualized holding period return (annual percentage rate)

Answer #1

Holding Period Return = [Selling Price-Purchase Price+Total Dividends]/Purchase Price = [88.67-77.98+5.9]/77.98 = 0.212747 = 21.2747%

**NOTE: Annualized Holding Period Return is calculated
UNDER 2 DIFFERENT ASSUMPTION.**

**Annualized Holding Period Return(assuming Average Annual
Rate) =** Holding Period Return/Holding Period = 0.212747/2
= 0.106373 = **10.6373%**

**Annualized Holding Period Return(assuming Compounded
Annual Rate):**

Holding Period Return = [(1+Annual Return)^Holding Period]-1

0.212747 = [(1+R)^2]-1

1.212747 = [(1+R)^2]

1.212747^1/2 = 1+R

1.101248-1 = R

Therefore, **Annualized Return =** 0.101248 =
**10.1248%**

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