Question

you created a portfolio by purchasing  2000 shares of x company 2 dollar each, and 2000 shares of y 1 dollar each.

During the year   x company declared a cash dividend of   200 cents per share, while y did not give any dividend.

After one year you sold your both the shares. x at 1.8 dollar each and   y at 1.3 dollar each.

Calculate the HPY for your portfolio.

Answer 1

The portfolio was created by only 2 types of share X,Y

	Share X	Share Y
Price	2	1
Vol	2000	2000
Total value	4000	2000
Portfolio Value	6000

Total Investemnt the portfolio = (2*2000) + (1*2000) = 6000

Now

X paid a dividend of $2 (200cents) per share

Total dividend income = 2*2000 = 4000

Selling Value = ( 1.8*2000)+(1.3*2000 ) = 6200

Gain from dividend = 4000

Total gain = 6200+4000= 10,200

HPY = Sell Value/ Buy value -1

= 10200/6000 -1 = 0.7 or 70%

Thanks