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You purchased a share of stock for $12. One year later you received $0.25 as a dividend and soldthe share for $12.92. What was your holding-period return?A. 9.75%B. 10.65%C. 11.75%D. 11.25%E. none of the above

Question

You purchased a share of stock for 12.Oneyearlateryoureceived12. One year later you received 0.25 as a dividend and soldthe share for $12.92. What was your holding-period return?A. 9.75%B. 10.65%C. 11.75%D. 11.25%E. none of the above

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Solution

The holding-period return is calculated by adding the dividend received and the selling price of the stock, subtracting the purchase price, and then dividing by the purchase price. Finally, multiply by 100 to get the percentage.

Here's the step-by-step calculation:

  1. Add the dividend received to the selling price: 0.25+0.25 + 12.92 = $13.17
  2. Subtract the purchase price from this sum: 13.1713.17 - 12.00 = $1.17
  3. Divide this difference by the purchase price: 1.17/1.17 / 12.00 = 0.0975
  4. Multiply by 100 to get the percentage: 0.0975 * 100 = 9.75%

So, the holding-period return is 9.75%, which corresponds to option A.

This problem has been solved

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