Question

Part E – Simple and Compound Holding Period Returns (HPR)

The following information is for solving Questions 36 to 40

Five years ago, Ryan purchased 100 shares of XYZ Limited at $25.50 per shares. Each quarter, XYZ shares would pay $0.50 in dividends. Today, Ryan sold his shares for $32.75 each.

Question 36

How much ($ amount) did Ryan make in capital gains per shares?

Question 36 options:

	$7.25
	$4.50
	$17.25
	$12.25
	None of the Above

Question 37

How much (% percent return) did Ryan make in capital gains per shares?

Question 37 options:

	28.4%
	17.65%
	67.65%
	48.04%
	None of the Above

Question 38

How much in dividends ($ amount) did XYZ shares pay during the 5 year period?

Question 38 options:

	$2.50
	$5.00
	$12.00
	$10.00
	None of the Above

Question 39

What would be the Simple Holding Period Return (HPR) per share during this five-year period?

Question 39 options:

	28.4%
	67.65%
	48.04%
	17.65%
	None of the Above

Question 40

What would be the Compound HPR per share during this five-year period?

Question 40 options:

	8.16%
	19.73%
	6.69%
	10.89%
	None of the Above

Answer 1

36.

Shares are bought at $25.5 and sold at $32.75, So Ryan made capital gains of 32.75-25.5= $7.25.

37.

Ryan made a gain of 7.25 per share on his investment of 25.5 per share.Calculating on spercentage terms , we get (7.25/25.5)*100 which is 28.4%.

38.

Given that $0.5 dividends are paid per quarter. So, for 5 years, each share will pay 0.5*4*5= $10 per share. As Ryan holds 100 shares, he will get 100*10= $1000.

39.

Simple holding period return per share can be calculated using the formula, Income generated+(ending value-initial value)/Initial value= (10+(32.75-25.5))/25.5=67.65%

40.

Compounded HPR can be calculated by the formula, ((Simple HPR+1)^(1/t))-1= (1.6765^(1/5))-1=10.89%.