Question

A client bought 100 units in a REIT for $28.71each. At the end of the year, the REIT paid dividends of $1.8 per unit. The client's units were worth $26.34 each at the end of the year. What is the client's holding period return on her REIT investment?

Answer 1

Holding Period Return (HPR)

Holding Period Return (HPR) is calculated by using the following formula

Holding Period Return (HPR) = [{(Current Price - Purchase Price) + Total Dividend Received} / Purchase Price] x 100

Current Value = $2,634 [100 units x $26.34 per unit]

Purchase Price = $2,871 [100 units x $28.71 per unit]

Total Dividend Received = $180 [100 units x $1.80 per unit]

Therefore, the Holding Period Return (HPR) = [{(Current Price - Purchase Price) + Total Dividend Received} / Purchase Price] x 100

= [{($2,634 - $2,871) + $180} / $2,871] x 100

= [(-$237 + $180) / $2,871] x 100

= [-$57 / $2,871] x 100

= -1.99% (Negative)

“Hence, the client's holding period return on her REIT investment will be -1.99% (Negative)”