Purchase Solution

# Holding Period and Stock Returns

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Sarah purchased 100 shares of General Electric stock of at a price of \$58.24 three months ago. She sold all stocks today for \$62.86. During the year the stock paid dividends of \$2.45 per share. What is Sarah's holding period return?

Mary purchased 200 shares of Harley Davidson Co. stock of at a price of \$95.72 six months ago. She sold all stocks today for \$95.42. During the year the stock paid dividends of \$4.12 per share. What is Mary's holding period return?

You purchased 250 shares of General Motors stock of at a price of \$89.58 two years ago. You sold all stocks today for \$80.50. During this period the stock paid dividends of \$5.94 per share. What is your annualized holding period return (annual percentage rate)?

You purchased 300 shares of General Electric stock of at a price of \$78.73 four years ago. You sold all stocks today for \$63.65. During that period the stock paid dividends of \$2.67 per share. What is your annualized holding period return (annual percentage rate)?

John purchased 100 shares of Black Forest Inc. stock of at a price of \$151.68 three months ago. He sold all stocks today for \$158.67. During this period the stock paid dividends of \$6.98 per share. What is John's annualized holding period return (annual percentage rate)?

John purchased 100 shares of SoftDrink Co. stock at a price of \$70.99 three months ago. He sold all stocks today for \$69.88. During that period the stock paid dividends of \$4.57 per share. What is John's effective annual rate?

##### Solution Summary

The solution answers questions on holding period return, annual percentage rate, and effective annual rate.

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1 Sarah purchased 100 shares of General Electric stock of at a price of \$58.24 three months ago. She sold all stocks today for \$62.86. During the year the stock paid dividends of \$2.45 per share. What is Sarah's holding period return?

No of shares= 100

Selling price per share= \$62.86
Purchase price per share= \$58.24
Capital Gains= \$4.62 = \$62.86 - \$58.24

Capital Gains Yield= 7.93% = \$4.62 / \$58.24

Dividend per share= \$2.45
Dividend Yield= 4.21% = \$2.45 / \$58.24

Holding Period Return = Capital Gains Yield + Dividend Yield= 12.14% = 7.93% + 4.21%

(Note, since we are calculating rates, return per share would be the same as return per hundred shares)

Purchase price for 100 shares= \$5,824 = 100 x \$58.24
Capital Gains for 100 shares= \$462 = 100 x \$4.62
Dividends for 100 shares= \$245 = 100 x \$2.45

Capital Gains Yield= 7.93% = \$462. / \$5,824.
Dividend Yield= 4.21% = \$245. / \$5,824.
Holding Period Return = 12.14% = 7.93% + 4.21%

2 Mary purchased 200 shares of Harley Davidson Co. stock of at a price of \$95.72 six months ago. She sold all stocks today for \$95.42. During the year the stock paid dividends of \$4.12 per share. What is Mary's holding period return?

No of shares= 200

Selling price per share= \$95.42
Purchase price per share= \$95.72
Capital Gains/ Loss= (\$0.30) = \$95.42 - \$95.72

Capital Gains Yield= -0.31% = -\$.3 / \$95.72

Dividend per share= \$4.12
Dividend Yield= 4.30% = \$4.12 / \$95.72

Holding Period Return = Capital Gains Yield + Dividend Yield= 3.99% = -.31% + 4.3%

(Note, since we are calculating rates, return per share would be the same as return per hundred ...

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