Chad purchased Hampton Industries Inc. stock for $14.65 and sold it 6 months lat
ID: 2773107 • Letter: C
Question
Chad purchased Hampton Industries Inc. stock for $14.65 and sold it 6 months later for $17.38 after receiving a $0.25 dividend. What is Chad's holding period return (HPR), Annual Percentage Rate (APR), and Effective Annual Rate (EAR)? The holding period is only 6 months, so the APR represents a whole year , which is twice the holding period return. The EAR can also be calculated with the financial calculator. The APR is the NOM%, 2 is the the P/YR, then calculate EFF%. what is the correct answer
20.34%, 40.68%, 9.70%
17.15%, 34.29%, 37.23%
18.63%, 37.27%, 40.74%
20.34%, 40.68%, 44.82%
20.34%, 40.68%, 9.70%
17.15%, 34.29%, 37.23%
18.63%, 37.27%, 40.74%
20.34%, 40.68%, 44.82%
Explanation / Answer
Holding period return:
=($17.38+$0.25-$14.65)÷$14.65
= 20.34%
APR: 20.34×2 = 40.68%
EAR: (1+20.34%)^2-1 = 44.82%
Last option is correct.