Asked by Brian Bentley on Mar 10, 2024

Verified

You purchase a share of CAT stock for $90. One year later, after receiving a dividend of $4, you sell the stock for $97. What was your holding-period return?

A) 14.44%

B) 12.22%

C) 13.33%

D) 5.56%

A) 14.44%

B) 12.22%

C) 13.33%

D) 5.56%

Holding-Period Return

The overall return earned from owning an asset or a collection of assets over a specified duration, often represented as a percentage.

Dividend

Funds distributed by a corporation to its shareholders, typically from the company's earnings.

- Determine and expound upon the returns from investment periods.

Verified Answer

DE

Donyell Elise

Mar 10, 2024

Final Answer :

B

Explanation :

The holding-period return (HPR) is calculated by adding the dividend received to the price appreciation of the stock, and then dividing by the initial purchase price. Here, the dividend is $4 and the price appreciation is $97 - $90 = $7. So, the total gain is $4 + $7 = $11. Dividing this by the initial purchase price of $90 gives an HPR of $11 / $90 = 0.1222, or 12.22%.

## Learning Objectives

- Determine and expound upon the returns from investment periods.