9. Using the data Date Close Dividends Adj. Close 12/31/2015 150.64 148.57 11/18
ID: 2744277 • Letter: 9
Question
9. Using the data
Date
Close
Dividends
Adj. Close
12/31/2015
150.64
148.57
11/18/2015
157.39
1.025
155.23
8/19/2015
145.87
1.025
142.93
5/20/2015
161.90
1.025
157.54
2/11/2015
164.48
1.025
159.04
1/2/2015
164.06
157.66
a) Compute the HPR for each one of the five sub-periods presented in the table. b) Compute the Total Return for 2015 by compounding the five HPR estimates in a) back to back. How does your estimate compare to the one you obtained in Question 8b above? Why?
8B.
Using adjusted closing prices only, what was the Total Return for the stock for the year?
-8.18%
Date
Close
Dividends
Adj. Close
12/31/2015
150.64
148.57
11/18/2015
157.39
1.025
155.23
8/19/2015
145.87
1.025
142.93
5/20/2015
161.90
1.025
157.54
2/11/2015
164.48
1.025
159.04
1/2/2015
164.06
157.66
Explanation / Answer
Holding Period Return = (Ending Price – Beginning Price + Interest or dividends) / Beginning Price
HPR on 11/18/2015 = (157.39 - 150.64 + 1.025) / 150.64 = 0.0516 or 5.16%
HPR on 8/19/2015 = (145.87 - 157.39 + 1.025) / 157.39 = -0.0667 or -6.67%
HPR on 5/20/2015 = (161.90 – 145.87 + 1.025) / 145.87 = 0.1169 or 11.69%
HPR on 2/11/2015 = (164.48 – 161.90 + 1.025) / 161.90 = 0.0223 or 2.23%
HPR on 1/2/2015 = (164.06 – 164.48 + 1.025) / 164.48 = -0.0026 or -0.26%
Total return by compounding HPR = [(1+ 0.0516)*(1 -0.0667)*(1+0.1169)*(1+0.0223)*(1-0.0026)] – 1 = 0.1177 or 11.77%
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