Question

Period    Jazman Solomom

1.    $7 $26

2.    $ 10    $ 27

3 .    $8    $ 34

4. $14    $30

a. From the price data, compute the​ holding-period returns for Jazman and Solomon for periods​ 2, 3 and 4.

The​ holding-period return in period 2 for Jazman is:    ​%. (Round to two decimal​ places.)

The​ holding-period return in period 3 for Jazman is? %.

The​ holding-period return in period 4 for Jazman is?    %.

From the price data in the​ table, compute the​ holding-period returns for Solomon for periods 2 through 4.

The​ holding-period return in period 2 for Solomon is?    %

The​ holding-period return in period 3 for Solomon is ?    %

The​ holding-period return in period 4 for Solomon is ? %

b. Judge whether the statement is true or​ false: "The​ holding-period rate of return is the return an investor would receive from holding a security for a designated period of​ time."

Answer 1

Answer a.

Jazman:

Holding Period Return in Period 2 = (Price in Period 2 - Price in Period 1) / Price in Period 1
Holding Period Return in Period 2 = ($10 - $7) / $7
Holding Period Return in Period 2 = 0.4286 or 42.86%

Holding Period Return in Period 3 = (Price in Period 3 - Price in Period 2) / Price in Period 2
Holding Period Return in Period 3 = ($8 - $10) / $10
Holding Period Return in Period 3 = -0.20 or 20.00%

Holding Period Return in Period 4 = (Price in Period 4 - Price in Period 3) / Price in Period 3
Holding Period Return in Period 4 = ($14 - $8) / $8
Holding Period Return in Period 4 = 0.75 or 75.00%

Solomon:

Holding Period Return in Period 2 = (Price in Period 2 - Price in Period 1) / Price in Period 1
Holding Period Return in Period 2 = ($27 - $26) / $26
Holding Period Return in Period 2 = 0.0385 or 3.85%

Holding Period Return in Period 3 = (Price in Period 3 - Price in Period 2) / Price in Period 2
Holding Period Return in Period 3 = ($34 - $27) / $27
Holding Period Return in Period 3 = 0.2593 or 25.93%

Holding Period Return in Period 4 = (Price in Period 4 - Price in Period 3) / Price in Period 3
Holding Period Return in Period 4 = ($30 - $34) / $34
Holding Period Return in Period 4 = -0.1176 or 11.76%

Answer b.

True, the holding period rate of return is the return earned by the investor during the period of time.