Holding period gain (Show formula) |
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Suppose you purchased 40 shares of XYZ stock for SAR 350.00 on February 1. |
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You sell the 40 shares of stock on October 1 of the same year for 672.40. |
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No dividends were paid during the year. |
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1. Calculate the holding period gain |
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2. Calculate the holding period return |
Solution :
1. Calculation of Holding period gain :
The formula for calculating the Holding period gain is
= Total Sale price of stock – Total Purchase price of stock
As per the information given in the question is
No. of shares of XYZ stock purchased = 40 ; Purchase price per share = SAR 350.00
Thus the
Total purchase price of stock = No. of shares of XYZ stock purchased * Purchase price per share
= 40 * SAR 350.00
= SAR 14,000
Thus Total purchase price of stock = SAR 14,000
No. of shares of XYZ stock sold = 40 ; Sale price per share = SAR 672.40
Thus the
Total Sale price of stock = No. of shares of XYZ stock sold * Sale price per share
= 40 * SAR 672.40
= SAR 26,896
Thus Total Sale price of stock = SAR 26,896
Thus the Holding period gain = Total Sale price of stock - Total purchase price of stock
= SAR 26,896 – SAR 14,000
= SAR 12,896
Holding period gain = SAR 12,896
2.Calculation of Holding Period Return:
Holding period return is the return earned on an investment for the period during which it is held.
The formula for calculating the holding period return is
= ( Total sale price + Dividends earned during the holding period – Total Purchase Price ) / Total Purchase Price
As per the information given in the question is
Total sale price = SAR 26,896 ; Dividends earned during the holding period = 0 ;
Total Purchase Price = SAR 14,000
Applying the above information in the formula we have
= ( 26,896 – 14,000 ) / 14,000
= 12,896 / 14,000
= 0.921143
= 92.1143 %
= 92.11 % ( When rounded off to two decimal places )
Thus the holding period return = 92.11 %
Holding period gain (Show formula) Suppose you purchased 40 shares of XYZ stock for SAR 350.00...
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