Note: P1-P0 = Price change given in certain text books

which we have given in the note book as Annual return.

(Point no: 1)
Problem No: 1
Price at the beginning of the year Rs.60
Dividend paid at the end of the year Rs.2.40
Price at the end of the year Rs.69.00
Solution:
The total return on this stock is calculated as follows:
R = ((C + P1-P0 )/P0)
C= Cash payment received during the period
P1= Price at the ending of the period
P0= Price at the beginning of the period
= ((2.40 + 69.00-60.00)/60.00) = 0.19 = 0.19*100 = 19% Excel
application
It is helpful to split the total return into two components, viz.,
current yield and capital gain/loss as follows:
Current Yield = ((Cash payment/Price at the beginning of the
period) + Capital return (Price at the ending of the period
Price at the beginning of the period)/Price at the beginning of the
period):
The total return of 19% can be broken down into
= ((2.40/60) + (69-60)/60) Excel application
= 0.04 +0.15 = 0.19
Return =0.19 or 19*100= 19%
Problem No: 2
If the price of a share on April 1, 2015 is Rs.25, the annual
dividend received at the end of the year is Rs.1 and the year end
price on March 31, 2015 is Rs.30, calculate the rate of return (R)
The total return on this stock is calculated as follows:
R = ((C + P1-P0 )/P0)

C= Cash payment received during the period

P1= Price at the ending of the period
P0= Price at the beginning of the period
= ((1.00 + 30.00-25.00)/25.00) = 0.24 = 0.24*100 = 24% Excel
application
It is helpful to split the total return into two components, viz.,
current yield and capital gain/loss as follows:
Current Yield = ((Cash payment/Price at the beginning of the
period) + Capital return (Price at the ending of the period
Price at the beginning of the period)/Price at the beginning of the
period):
The total return of 24% can be broken down into
= ((1.00/25) + (30-25)/25) Excel application
= 0.04 + 0.20 =0.24
Return =0.24 or 0.24*100= 24%
Problem No: 3
Maruti Suzukis share price on April 1, 2001 was Rs. 1,271.00
and the price on March 9, 2002 was Rs. 1,341.90. The dividend
received as Rs.7.50. What is the holding period return (R)?
Calculate the dividend yield and capital gain yield.
Solution:
The total return on this stock is calculated as follows:
R = ((C + P1-P0 )/P0)
C= Cash payment received during the period
P1= Price at the ending of the period
P0= Price at the beginning of the period
= ((7.50 + 1341.90-1271.00)/1271.00) = 0.061684
= 0.06168*100 = 6.168% Excel application

It is helpful to split the total return into two components, viz.,

current yield and capital gain/loss as follows:
Current Yield = ((Cash payment/Price at the beginning of the
period) + Capital return (Price at the ending of the period
Price at the beginning of the period)/Price at the beginning of the
period):
The total return of 6.168% can be broken down into
= ((7.50/1271.00) + (1341.90-1271.00)/1271.00) Excel
application
= 0.0059 + 0.05578 =0.6168
Return =0.6168 or 0.6168*100= 6.168%
Problem No: 4
Vijay brought stocks of Energy Drive, Speedy and Safe Motors,
expecting a rate of return of 30 percent after a year. The
purchase prices and the end prices are given below. Find out
whether his expectations are fulfilled.
Stock

Energy Drive
Speedy
Safe Motors
Solution:

13 January
2011
101
45
335

Prices on
23 January
2012
125
104
421

Dividend
10%
15%
35%

The total return on this stock is calculated as follows:

R = ((C + P1-P0 )/P0)
C= Cash payment received during the period
P1= Price at the ending of the period
P0= Price at the beginning of the period
Stock

Formula
R = ((C + P1-P0 )/P0)

Answer

Energy
Drive

= ((0.10 + 125.00101.00)/101.00)

= 0.2381 = 0.2381*100

= 24.00
Speedy
= ((0.15 + 104.00=0.3144 = 1.3144 *100
45.00)/45.00)
= 131.44
Safe
= ((0.35 + 421.00=0.2578 = 0.2578 *100
Motors
335.00)/335.00)
=25.78
Vijays expectations will be fulfilled with the purchase of
Speedy stock but not the other two.
Problem No: 5
Smithkline Health Cares share price on February 28, 1998 was
Rs.401 and the price on October 26, 1998 was Rs.480. Dividend
received was Rs.35. What is the rate of return (R)
Solution:
The total return on this stock is calculated as follows:
R = ((C + P1-P0)/P0)
C= Cash payment received during the period
P1= Price at the ending of the period
P0= Price at the beginning of the period
= ((35.00 + 480-401)/401) = 0.2843
= 0.02843*100 = 28.43% Excel application
Exercise Problems:
Problem No: 6.
The following information about Alfa
Company is given find out rate of return:
Price at the beginning of the year Rs. 500
Price at the end of the year Rs.600
Dividend paid Rs.25
Solution: 25% Rate of return (R)
Current yield = 5 % Capital gain yield is 20 percent.
Problem No: 7

The price at the beginning of the year was Rs.37per share and
closing is Rs. 40.33. The dividend paid during the year was
Rs.1.85. Find out capital gain/loss and dividend yield.
Solution: 14% Rate of return (R)
Current yield = 5 %

Capital gain yield is 9 %.

Problem No: 8
Suppose a stock begins in the year with a
price of Rs.25 per share and ends with a price of Rs.35 per
share. During the year, it paid Rs.2 dividend per share. What
are its dividend yield, its capital gain yield and its total return for
the year?
Solution: 48% Rate of return (R)
Current yield = 8 %

Capital gain yield is 40 %.