Wednesday, December 10, 2008

Annual Rate of Return



Continuing from the previous discussion, we will introduce a new variable called Holding Period Yield (HPY). Let's say after investing $1 for a year, I get $1.5. Therefore HPR (Holding Period Return) is 1.5/1 = 1.5.
HPY = HPR -1
in this case
1.5-1
= 0.5
In percentage, Holding Period Yield is 50%

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