At the beginning of the year an investor purchased 100 shares of common stock from ABC Corporation at $10 per share

Finance Oct 21, 2020

At the beginning of the year an investor purchased 100 shares of common stock from ABC Corporation at $10 per share. During the year, the firm paid dividends of $1 per share. At the end of the year, the investor sold the 100 shares at $11 per share. What is the Holding period return?

Expert Solution

Computation of the holding period return:-

Holding period return = (Ending price + Dividend - Beginning price) / Beginning price

= ((100*$11) + (100*$1) - (100*$10)) / (100*$10)

= ($1,100 + $100 - $1,000) / $1000

= $200 / $1,000

= 20%

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