Calculating Stock Investment Payoff and Holding-Period Return

Summary

The document asks how to distinguish the payoff from the return on a stock investment. An investor spends the stated amount to buy shares at the current price, then considers a lower share price six months later. The payoff is calculated as the change in share price multiplied by the number of shares, producing a dollar loss in the example.

The answer gives the asset’s holding-period return as the price change divided by the starting price. This expresses the gain or loss relative to the initial share value, rather than as a dollar amount. The explanation is brief and assumes a simple unlevered stock position with no dividends, fees, taxes, or other cash flows; it does not discuss annualizing the six-month return.

Key ideas

• Dollar payoff equals the share-price change multiplied by the number of shares held.
• Holding-period return measures the price change relative to the starting price.
• Payoff is expressed in dollars, while return is a proportional measure.
• The example does not account for dividends, costs, taxes, or annualization.

Tags

# Calculate 6 month- return for an investment


# Calculate 6 month- return for an investment












Assume that the price of DF stock went from a price of $104 on March 2 to 146 on April 1.

With a current stock price of 146,

Invest all of your amount 14,600 in the DF stock (buy 100 shares)

Calculate the payoff and 6-month return for this investment alternative by assuming that the stock price is observed to be 50 on 6 months later.

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I calculate payoff as follows

$$\pi = 100* ( 50- 146)= - 9600$$

But how can I calculate the 6 month return for this investment?

## Answer by JazKaz (score 1, accepted)

https://quant.stackexchange.com/a/53249

Yep I would say that the payoff is accurate, and as for the return (P End - P Beginning) / P Beginning Gives the return on that asset.

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