In: Finance
Investment Vehicle | ||
X | Y | |
Cash received | ||
1st quarter | $0.96 | $0.00 |
2nd quarter | $1.16 | $0.00 |
3rd quarter | $0.00 | $0.00 |
4th quarter | $2.34 | $2.19 |
Investment value | ||
Beginning of year | $30.27 | $54.91 |
End of year | $27.79 | $55.57 |
Calculate a one-year holding period return (HPR) for the following two investment alternatives: Which investment would you prefer, assuming they are of equal risk? Explain. The HPR for investment X is nothing%. (Enter as a percentage and round to two decimal places.)
X
investment beginning value= $30.27
investment closing value= $27.79
Cash received during year = 0.96+1.16+0+2.34=
$4.46
Holding period return = (Cash received + Ending value - Beginning
value)/Beginning value * 100
=(4.46+27.79-30.27)/30.27* 100
=6.54%
So Holding period Return of Investment X is
6.54%
Y
investment beginning value= $ 54.91
investment closing value= $55.57
Cash received during year = 0+0+0+2.19= $2.19
Holding period return = (Cash received + Ending value - Beginning
value)/Beginning value * 100
=(2.19+55.57-54.91)/54.91* 100
=5.19%
So Holding period Return of Investment Y is
5.19%
If both investment is equal Risky, Investment X will be preferred,
as Holding period Return is more in case of Investment
X