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On January 1, 2017, you purchased shares of ABC Corporation for $200 and received annual dividends of $7
On January 1, 2017, you purchased shares of ABC Corporation for $200 and received annual dividends of $7. On January 1, 2020, you divested your position $190. What was your realized holding period return?
answer choices
5.50%
-1.50%
5.79%
-5.00%
Expert Solution
Given that initial investment in the stock is $200.
Annual dividends received= $7. So, for 3 years, total dividends received= 7*3= $21.
Final price for which the stock is sold is $190.
Holding period return can be calculated as: ((Final price+Dividends)/Initial Investment)-1
= ((190+21)/200)-1
= (211/200)-1
= 5.50% (Option A).
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