Question #14
Reading: Reading 20 Discounted Dividend Valuation
PDF File: Reading 20 Discounted Dividend Valuation.pdf
Page: 6
Status: Incorrect
Correct Answer: A
Your Answer: B
Question
An investor buys shares of a firm at $10.00. A year later she receives a dividend of $0.96 and sells the shares at $9.00. What is her holding period return on this investment?
Answer Choices:
A. -0.8%
B. +1.2%
C. -0.4%
Explanation
The holding period return = ($0.96 + $9.00 / $10.00) – 1 = – 0.004 or – 0.4%