Suppose that a year later, NTT's common stock is selling for $75 per share. During the 1 year period, NTT paid a $4 common stock dividend. Determine the realized (ex-post) percentage holding period return on NTT common stock
4/75 = 5.33% annual return, if the stock price did not change. You did not say what the stock price was a year earlier.
To determine the realized (ex-post) percentage holding period return on NTT common stock, you need to consider both the change in stock price and any dividends received during the holding period.
The formula to calculate the realized percentage holding period return is as follows:
Realized Percentage Holding Period Return = [(Ending Value - Beginning Value + Dividends)/Beginning Value] * 100
In this case, the beginning value is the initial stock price, while the ending value is the stock price after one year. Dividends refer to any cash dividends received during the holding period.
Given the information provided:
Beginning Value (Initial Stock Price) = $75
Ending Value (Stock Price after 1 year) = $75
Dividends = $4
Plugging in these values into the formula, we can determine the realized percentage holding period return:
Realized Percentage Holding Period Return = [(75 - 75 + 4)/75] * 100
Realized Percentage Holding Period Return = [4/75] * 100
Realized Percentage Holding Period Return ≈ 5.33%
Therefore, the realized percentage holding period return on NTT common stock is approximately 5.33%.