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

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

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

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

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

H P R=1.19

Now

H P Y=H P R-1

H P Y=1.19-1

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