Holding Period Return

CFA Level I Corporate Finance
#1

Hello All,

If an investor purchased 100 shares of a stock at $30.5/share, and sold at $34.5/share. Dividend was $51.55. HPR is equal to?

I did this:

(3450 - 3050 + 51.55) / 3050 = 14.8% However, official answer is -10.1%. Can someone please help me?

Thanks

#2

The $30.50 and $34.50 are reversed.

#3

Thanks S2000magician for your help. I did think about it before posting this question. However, isn’t the HPR = (final price + dividend - initial price)/Initial price?

I am not sure whether initial price + dividend -final price would make sense because initial price is a -ve cash flow (we invest the money). Dividend is a positive cash flow, and final price is also positive cash flow. HEnce, how can we add soemthing we receive to something we pay? I am not sure. I did check an example in the official curriculum, and they have used (final price + dividend - initial price)/Initial price. And this formula makes sense. However, I am not sure why in this example, they are reversing the initial price and final price. Can you please help me?

Thanks in advance.

#4

I think someone fouled up. Yes, it’s

(final price – initial price + dividend) / initial price

I imagine that they just mixed up the initial price and the final price.

#5

Thanks S2000magician!

#6

You’re welcome.