Question

Information about three securities appears next. Stock 1 Stock 2 Bond 1 Beginning-of- Year Price $43.20 $ 1.95 $1,090 End-of-Year Interest/Dividend Price Paid $47.45 $ 2.20 $ 2.09 $ 0 $1,118 $ 48.00 a. Assuming interest and dividends are paid annually, calculate the annual holding period return on each security. (Round your answers to 1 decimal place.) Annual Holding Period Return Stock 1 Stock 2 Bond 1

Answer 1

Annual holding period return=(End of the year price-Beginning of year price +Interest or dividend paid)/(Beginning of year price )

Annual holding period returns are:

Stock 1: =(47.45-43.2+2.2)/43.2=0.149305556 or 14.9% (Rounded to one decimal place)

Stock 2: =(2.09-1.95+0)/1.95=0.071794872 or 7.2% (Rounded to one decimal place)

Bond 1: =(1118-1090+48)/1090=0.069724771 or 7.0% (Rounded to one decimal place)