An investor purchased 100 shares of common stock at Ghc20 per share one year ago. The...

An investor purchased 100 shares of common stock at Ghc20 per share one year ago. The company declared and paid a dividend of Ghc2 per share during the year. The investor sold the stock for Ghc21 per share after the one year holding period.

Calculate the cedi return from this investment.
Calculate the HPR for this investment.
Partition the HPR into its dividend and capital appreciation components.

Solutions

Expert Solution

1. A. Cedi return=number of shares (selling price-purchase price+dividend paid)

= 100(21-20+2)= Ghc 300.

2. Holding period return= number of shares (selling price-purchase price+dividend paid)/(number of shares x purchase price)

= 100(21-20+2)/2000

= (300/2000)=15%

3. Dividend appreciation= (dividend gain/ purchase price)= (100/2000)=5%

Capital gain appreciation= (200/2000)= 10%

jeff jeffy answered 1 year ago

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