Calculate the following investment's the holding-period return. DATA TIME STOCK PRICE (SAR) 1 20 2 23...

Calculate the following investment's
the holding-period return.

DATA
TIME	STOCK PRICE (SAR)
1	20
2	23
3	21
4	25

Expert Solution

Calculation of Historical Period Return (HPR)-

Assumption - For the given stock prices without considering the dividends and stock splits.

If a stock is brought at 20 in Year 1 and sold at 25 in Year 4, the overall rate of return on these investments will be the HPR.

For calculating HPR, we need the purchase price. Purchase price means how much you paid at the beginning of the period, so here the Purchase price will be 20

And the Selling Price (the price at which you sold the stock) at the end of the period will be 25

Once we have the purchase price and selling price, HPR can be computed.

HPR = (Vn-Vo)/ Vn

= (25-20)/20 Where Vn = Purchase Price

= 25% VO = Selling Price

It gives the overall net return. It means that if you invested 20 in Year 1 and sold it for 25 at year 4, the overall return on your investment (HPR) will be 25%.

jeff jeffy answered 2 years ago

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