Question

1. Calculate the rates of return (holding period returns) for the following stocks:  

Stock	Beginning price: P0	Ending price: P1	Dividend payment: D1
A	21.38	16.06	2.6
B	108.74	118.92	5.25
C	4.25	5.58	0.19

Part 1

What was the rate of return for stock A?

Part 2

What was the rate of return for stock B?

Part 3

What was the rate of return for stock C?

2. You bought Samsung stock for $45 on April 1. The stock paid a dividend of $3 on July 1, and had a price of $53. It is now Oct. 1, and the stock price is $60.

Part 1

What was the arithmetic average quarterly return?

Part 2

What was the geometric average return per quarter?

3. You've recorded the following prices and dividend payments for a stock:

Month	Stock price	Dividend
1	43.28
2	43.44	0.65
3	41.86
4	44.15
5	44.34	0.65

Part 1

What was the return in month 5?

Part 2

What was the arithmetic average monthly return?

Part 3

What was the geometric average return per month

Answer 1

Answer to Question 1:

Part 1.

Rate of Return = (Dividend Received + Ending Price – Beginning Price) / Beginning Price * 100
Rate of Return = ($2.60 + $16.06 - $21.38) / $21.38 * 100
Rate of Return = -$2.72 / $21.38 * 100
Rate of Return = -12.72%

Part 2.

Rate of Return = (Dividend Received + Ending Price – Beginning Price) / Beginning Price * 100
Rate of Return = ($5.25 + $118.92 - $108.74) / $108.74 * 100
Rate of Return = $15.43 / $108.74 * 100
Rate of Return = 14.19%

Part 3.

Rate of Return = (Dividend Received + Ending Price – Beginning Price) / Beginning Price * 100
Rate of Return = ($0.19 + $5.58 - $4.25) / $4.25 * 100
Rate of Return = $1.52 / $4.25 * 100
Rate of Return = 35.76%