The following table presents select snapshots from the 2015 price and dividend h
ID: 2822771 • Letter: T
Question
The following table presents select snapshots from the 2015 price and dividend history of the common stock for 3M, as obtained from Yahoo financial.
Date
Close
Dividends
Adj. Close
12/31/15
150.64
148.57
11/18/15
157.39
1.025
155.23
8/19/15
145.87
1.025
142.93
5/20/15
161.90
1.025
157.54
2/11/15
164.48
1.025
159.04
1/2/15
164.06
157.66
A.) Using the closing price and the dividend data provided, what was the holding period return (HPR) for the stock in 2015?
B.) Using adjusted closing prices only, what was the Total Return for the stock for the year?
C.) Do your two estimates differ? Why?
Date
Close
Dividends
Adj. Close
12/31/15
150.64
148.57
11/18/15
157.39
1.025
155.23
8/19/15
145.87
1.025
142.93
5/20/15
161.90
1.025
157.54
2/11/15
164.48
1.025
159.04
1/2/15
164.06
157.66
Explanation / Answer
A. Holding period return- Income+ (End value- Initial Value)/ Intial Value
= 4.1+(150.64-164.06)/164.06
= 5.68%
B Total return using adjusted price only
=148.57-157.66/157.66
=5.77%
C. The difference in the above two return could be due to company information like Dividend , Split, Bonus etc after the Closing for the day. The adjusted Closing considers all the information released after closing of market for the day.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.