Question

What is the annual holding period return for an investor that buys a stock at $67, earns dividends of $3.00,$3.10, and $3.15 and sells the stock for $72 after the three years?

Answer 1

Purchase Price = $67
Dividends received = $3.00, $3.10 and $3.15
Selling Price = $72

Holding Period = 3 years

Holding Period Return = [Selling Price + Dividends Received - Purchase Price] / Purchase Price
Holding Period Return = [$72 + $3.00 + $3.10 + $3.15 - $67] / $67
Holding Period Return = $14.25 / $67
Holding Period Return = 0.2127 or 21.27%

Annual Holding Period Return = Holding Period Return / 3
Annual Holding Period Return = 21.27% / 3
Annual Holding Period Return = 7.09%