The holding period return of a stock purchased for $45 and sold for $55 one year later if the stock also paid $3 in dividends during that time period is 28.9%. Market risk is also known as non-diversifiable risk.
Diversifiable risk refers to the possibility that the price of a security will change due to its specific characteristics. Diversification of an investor's portfolio can be used to mitigate, if not eliminate, this type of risk. The holding period return is the total return from income and asset appreciation expressed as a percentage over a period of time. HPR = ((Income + (end of period value - original value)) / original value) * 100 is the holding period return formula.
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