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Suppose you paid $18.50 per share for Commerce Group Inc. common stock and sold it one year later for $24 per share. What was your holding period return if the stock paid no dividends during the year?

Respuesta :

The answer is 29.729% .

Given,

Bought Commerce Group Inc. common stock for $18.50 per share.

Sold it one year later.

Sold Commerce Group Inc. common stock for $24 per share.

The stock paid no dividends during the year.

Since the stock did not pay any dividends during the year the formula for holding period return becomes,

Holding Period Return (HPR) = [tex]\frac{Selling price - Purchase Price}{Purchase Price}[/tex]×100

Now, substituting the given values in the above-mentioned formula we get,                                                

                                                = [tex]\frac{24-18.50}{18.5}[/tex]×100

                                                = [tex]\frac{5.50}{18.50}[/tex]×100

                                                = 29.729%

Hence, for the given scenario holding period return if the stock paid no dividends during the year is 29.729%.

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