Date Close Dividends Adj. Close 12/31/2015 150.64 148.57 11/18/2015 157.39 1.025
ID: 2744284 • Letter: D
Question
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
The following table presents select snapshots from the 2015 price and dividend history of the common stock for 3M, as obtained from Yahoo financial.
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
12/31/2015
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
Answer a) HPR = Dividend+Appreciation in stock/Initial Investment Dividend Amount Q1 1.025 Q2 1.025 Q3 1.025 Q4 1.025 Total 4.100 Appreciation in stock (Closing Price) Price at beginning 164.06 Price at ending 150.64 Appreciation (13.42) HPR = 4.10+(13.42)/164.06 HPR = -5.68% Answer b) HPR = Dividend+Appreciation in stock/Initial Investment Dividend Amount Q1 1.025 Q2 1.025 Q3 1.025 Q4 1.025 Total 4.100 Appreciation in stock (Adj Closing Price) Price at beginning 157.66 Price at ending 148.57 Appreciation (9.09) HPR = 4.10+(9.09)/157.66 HPR = -3.17% Answer c) Yes, Our estimates differ. Because Share price did not fall, As we espect. Therefore HPR improved.
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