You are considering two investment alternatives. The first is a stock that pays quarterly dividends of $0.38 per share and is trading at $25.83 per share; you expect to sell the stock in six months for $29.25. The second is a stock that pays quarterly dividends of $0.64 per share and is trading at $30.94 per share; you expect to sell the stock in one year for $33.53. Which stock will provide the better annualized holding period return? The 1-year HPR for the first stock is nothing %.

Question

Weston Grant

Business

26 July, 03:12

You are considering two investment alternatives. The first is a stock that pays quarterly dividends of $0.38 per share and is trading at $25.83 per share; you expect to sell the stock in six months for $29.25. The second is a stock that pays quarterly dividends of $0.64 per share and is trading at $30.94 per share; you expect to sell the stock in one year for $33.53. Which stock will provide the better annualized holding period return? The 1-year HPR for the first stock is nothing %.

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Answers (1)

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Morgan Christian · Answer 1

The 1-year HPR for the first stock is 16.18%

Explanation:

The computation is shown below:

For investment 1 -

The formula is shown below:

= (Income * quarter) + Value at the end - Value at the beginning : (Value at the beginning) * 100

= { ($0.38 * 2) + $29.25 - $25.83} : ($25.83) * 100

= ($0.76 + $29.25 - $25.83) : ($25.83) * 100

= ($4.18 : $25.83) * 100

= 16.18%