At the beginning of the year, Krystal purchases shares in DEF Company for $50 a...

A one-year holding-period return includes both income received and the change in the security ' s market value . Krystal purchased the shares for $50, received $2.50 in dividends, and sold them for $49. Her capital change is therefore a $1 loss. Combining this loss with the dividend gives a net investment gain of $1.50 per share:

$2.50 dividend − $1.00 capital loss = $1.50.

The return is then:

$1.50 ÷ $50.00 = 0.03 = 3.0% .

The IFC material distinguishes total investment return from calculations that consider only a change in price and emphasizes correctly identifying the components of investment performance. It also uses beginning value as the denominator when calculating a holding-period return. Therefore, Krystal ' s one-year rate of return is 3.0% , making D correct.