Investment Analysis & portfolio management 10th Edition by reilly & brown chapter 1: problem 1 with solution

Problem 1

On February 1, you bought 100 shares of stock in the Francesca Corporation for $34 a share and a year later you sold it for $39 a share. During the year, you received a cash dividend of $1.50 a share. Compute your HPR and HPY on this Francesca stock investment.

Solution

Given Data:

Number of shares = 100

Buying Price/share = $34

Selling price/share = $39

Cash dividend received/share = $1.5

As we sold the shares after one year so

HPR= Ending Value of Investment  Beginning Value of Investment H P R=\frac{\text { Ending Value of Investment }}{\text { Beginning Value of Investment }}

HPR=(39×100)+(1.5×100)(34×100)H P R=\frac{(39 \times 100)+(1.5 \times 100)}{(34 \times 100)}

HPR=3900+1503400H P R=\frac{3900+150}{3400}

HPR=40503400H P R=\frac{4050}{3400}

HPR=1.19H P R=1.19

Now

HPY=HPR1H P Y=H P R-1

HPY=1.191H P Y=1.19-1

HPY=0.19 or 19%H P Y=0.19 \text { or } 19 \%

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