If you buy a stock for 35 per share in January 1st 2008 and

If you buy a stock for $35 per share in January 1st 2008 and sell it six months later for $40 after collecting $1 per share dividend at the end of the semester. What is your holding period return for this stock?

A) 13.14%

B) 17.14 %

C) 13.57%

D) 12.86

E) 14.57

Solution

Answer: B

HPR = [{Dividend income + (Ending value of stock – Beginning value of stock)} / Beginning value of stock] × 100

         = [$1 + ($40 - $35)} / $35] × 100

         = [(1 + 5) / 35] × 100

         = (6 / 35) × 100

         = 17.14285….. %

         = 17.14%