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20 February, 16:41

Last year Marla purchased 100 shares of stock for $8 per share. She paid a flat $75 to purchase the shares. Since making her purchase, she has received $200 in dividends. Marla is concerned that the stock price will fall below its current FMV of $7. Calculate her holdingperiod return if she sells today and pays a $75 commission.

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  1. 20 February, 16:45
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    For Marla,

    Number of shares purchased is 100 @ $8 per share

    Initial Position = 100 * 8 = $800

    Dividends Received = $200

    Brokerage Paid = 75 + 75 = $150

    Current Value of Stock = $7

    Current Position for 100 shares @ $7 per share

    Current Position = $700

    Holding Period Return = Profit/Initial Investment

    Holding Period Return = ((700 - 800) - 150 + 200) / 800

    Holding Period Return = - 6.25%
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