Holding Period Return/Yield: Definition and Formula.

What is Holding Period Return/Yield?

The holding period return (HPR) or yield is a measure of the performance of an investment over a given period of time. It is calculated by taking the difference between the initial value of the investment and the final value of the investment, divided by the initial value of the investment.

For example, if you invest \$100 in a stock and the stock price increases to \$105 at the end of the year, your holding period return would be 5%.

Why do we calculate holding period returns?

The holding period return (HPR) is the percentage return realized on an investment over a particular time period. The HPR takes into account both the income earned on the investment (e.g., dividends and interest) as well as any capital gains or losses.

There are a number of reasons why investors might be interested in calculating the HPR on their investments. First, the HPR can be a useful metric for assessing the performance of an investment. For example, an investor might want to compare the HPR of a stock to the HPR of a bond to see which investment performed better over a particular time period.

Second, the HPR can be used to help make investment decisions. For example, an investor might compare the HPR of a stock to the HPR of a bond and decide to sell the stock and buy the bond if the bond has a higher HPR.

Third, the HPR can be used to calculate other important investment metrics, such as the internal rate of return (IRR) and the net present value (NPV).

Fourth, the HPR can be used in asset allocation models to help determine the optimal mix of assets for a portfolio.

Finally, the HPR can be used to benchmark the performance of a portfolio or individual investments against a desired return.

What is the holding period return of a bond?

A bond's holding period return is the total return on the bond over the course of its holding period. This includes any interest payments made on the bond as well as any capital appreciation or depreciation.

To calculate a bond's holding period return, you first need to determine the bond's purchase price and its ending price. The purchase price is the price you paid for the bond when you first bought it. The ending price is the price you sold the bond for, or the price of the bond at maturity if you held it until it matured.

Once you have those two numbers, you simply need to subtract the purchase price from the ending price and divide by the purchase price. This will give you the percentage return on the bond over the course of its holding period.

For example, let's say you buy a bond for \$1,000 and sell it one year later for \$1,050. The holding period return on the bond would be (1,050-1,000)/1,000, or 5%.

It's important to note that the holding period return is different from the coupon rate. The coupon rate is the interest rate paid on the bond, while the holding period return includes both the interest payments and any price appreciation or depreciation.

The holding period return is also different from the yield to maturity. The yield to maturity is the rate of return you would earn if you held the bond until it matured and reinvested all of the interest payments at the same rate.

To sum up, the holding period return is the total return on a bond over the course of its holding period, including interest payments and any price appreciation or depreciation.

What is holding period rate of return with example?

The holding period rate of return (HPR) is a rate of return that measures the performance of an investment over a specified period of time.

For example, let's say you buy a stock for \$100 and sell it one year later for \$120. Your HPR would be 20%.

To calculate your HPR, you need to know the following:

-The purchase price of the investment
-The sale price of the investment
-The length of time you held the investment

Here's the formula for HPR:

HPR = (Sale Price - Purchase Price) / Purchase Price * 100

where

Sale Price = the sale price of the investment
Purchase Price = the purchase price of the investment What is total yield? The total yield is the percentage of return on an investment over a specified period of time, including both income and capital gains. The total yield is often expressed as an annual percentage rate.

How do I calculate current yield?

To calculate current yield, you first need to know the bond's coupon rate and its current market price. The current yield is calculated by dividing the bond's annual coupon payments by its current market price. For example, if a bond has a coupon rate of 5% and a market price of \$1,000, the current yield would be 5% (\$50/\$1,000).

It's important to note that the current yield is a measure of a bond's yield to maturity, not its total return. The total return of a bond includes interest payments as well as any capital gains or losses realized when the bond is sold.