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An investor purchased 50 shares of a stock for $17.25 per share at the beginning of the quarter. If the investor sold all of the shares for $13.25 per share after receiving a $25.77 dividend payment at the end of the quarter, the holding period return is closest to Question 9Answera.−11.0%.b.−15.6%c.−20.2%.

Question

An investor purchased 50 shares of a stock for 17.25pershareatthebeginningofthequarter.Iftheinvestorsoldallofthesharesfor17.25 per share at the beginning of the quarter. If the investor sold all of the shares for 13.25 per share after receiving a $25.77 dividend payment at the end of the quarter, the holding period return is closest to Question 9Answera.−11.0%.b.−15.6%c.−20.2%.

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Solution

To calculate the holding period return, we need to follow these steps:

  1. Calculate the initial investment: This is the price per share at the beginning of the quarter multiplied by the number of shares. So, 50 shares * 17.25/share=17.25/share = 862.50.

  2. Calculate the final value of the investment: This is the price per share at the end of the quarter multiplied by the number of shares, plus any dividends received. So, 50 shares * 13.25/share+13.25/share + 25.77 = $687.77.

  3. Calculate the holding period return: This is the final value of the investment minus the initial investment, divided by the initial investment, expressed as a percentage. So, (687.77687.77 - 862.50) / $862.50 = -0.202 or -20.2%.

So, the holding period return is closest to -20.2%, which is option c.

This problem has been solved

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