The following table presents select snapshots from the 2015

The following table presents select snapshots from the 2015 price and dividend history of the common stock for 3M, as obtained from Yahoo financial.

Date

Close

Dividends

Adj. Close

12/31/15

150.64

148.57

11/18/15

157.39

1.025

155.23

8/19/15

145.87

1.025

142.93

5/20/15

161.90

1.025

157.54

2/11/15

164.48

1.025

159.04

1/2/15

164.06

157.66

A.) Using the closing price and the dividend data provided, what was the holding period return (HPR) for the stock in 2015?

B.) Using adjusted closing prices only, what was the Total Return for the stock for the year?

C.) Do your two estimates differ? Why?

Solution

A. Holding period return- Income+ (End value- Initial Value)/ Intial Value

= 4.1+(150.64-164.06)/164.06

= 5.68%

B Total return using adjusted price only

=148.57-157.66/157.66

=5.77%

C. The difference in the above two return could be due to company information like Dividend , Split, Bonus etc after the Closing for the day. The adjusted Closing considers all the information released after closing of market for the day.