An investor purchases 100 shares of stock at a price of $40 per share. The investor holds the stock for exactly one year and then sells the 100 shares at a price of $41.50 per share. On the date of sale, the investor receives dividends totaling $200. The holding period return on the investment is closest to:
HPR = (P1 - P0 + D1 ) / P0 .In this problem: (41.50 - 40 + 2) / 40 =0 .0875 = 8.75%