Holding Period Return | Holding Period Yield - Annual HPR | Annual HPY | Concepts and Calculations - YouTube

Assalamualaikum (Peace be upon you) hello! and welcome everyone to Finance School With Md Edrich Molla,   

hope, you are doing well, today we are going to discuss about holding period return and holding period yield  

if we want to know about the holding  period return, then we have to say  

holding period return is the comparison between the initial price of a stock or a security and  

the ending price or selling price of a security  or of a stock, this is how we can  

find out the holding period return, if we want to define about the holding period yield then we  

have to say, it is the percentage form of holding period return, now we can show you the equations  

of the holding period return and holding period yield, then we will give you some problems to solve  

in today's class, first of all we will write holding period return

shortly written as HPR

so equal we will write Pn divided by P0

where in the previous video we've shown you, Pn is the ending price

of security or an investment, on  the other hand P0 is equal

beginning price

of a security,

it's actually the selling price, on  the other hand P0 indicates the  

initial price or purchasing price of a security or of a stock, so this is how we can find out  

the holding period return and this kind of measure or calculation is related to the historical return  

so we will write the second formula as I said,  

second formula or second  equation of holding period yield,

it is written shortly HPY, in  this equation we will have HPR

minus 1 multiplied by 100, by this equation we actually show the holding period return  

that is why we have to multiply with 100  so here you can see HPR minus 1 multiplied  

by 100, HPR indicates the holding period return, you can see on your screen a question is given  

that question we will solve right now using  those formula, so let us start the calculation,  

if you look at the question then you will find,  there are two information given, so we will write  

the given information first then we will show the equation and put the value into them, so now we will write,

given

P0 is equal dollar 220 on the other hand  Pn is equal dollar 245 and we have been asked to  

compute two requirements, one is HPR and second requirement is HPY, I've shown you already  

the equations, so let us have the calculation  using that equation, let's start first is HPR  

as you know HPR equal Pn divided by P0 so here Pn is the selling price or ending price of  

a security, on the other hand, P0 is equal  the initial or purchasing price of the security,

Pn is given here 245 divided by P0 is equal to 120, so we need to calculate right now, here  

we have 1.11, it is the HPR, I mean holding  period return, now we will go to next requirement  

that is requirement ii, HPY, we will write second requirement is HPY, as we have here the equation is  

as we know HPR minus 1 multiplied by 100, here we have HPR is equal 1.11 minus 1 multiplied by  

100 equal 0.11 multiplied by 100 equal 11 percent, now you can see, we have computed HPR and HPY,

if you see the results, the form of results then you  can see, here we show the HPR as numeric value,  

where we have the result is 1.11, on the other hand in the HPY, you can see, here  

we show the result in the percentage form, so basic difference between HPR and HPY, it is the numeric  

form, the result will be shown numerically, on the other hand in the HPY, it is holding period  

yield or holding period return this is why we  will show it in percentage form, so this is  

actually the basic difference between HPR and HPY, so I think you have come to understand how we  

annual HPY, we need to calculate first  the holding period return then we will  

compute the annual HPR and annual HPY, this is why we have been given here

Pn, I mean selling price of a security is equal dollar 330  

on the other hand, P0 or purchasing  price or initial investment is dollar  

320 and we have also given number of period or number of years equal two years, and two requirements we have to compute in this particular problem,

so first requirement is annual HPR,

and second requirement

is HPY, so for calculating those  requirements we need to compute first  

the holding period return, I mean HPR, so we should calculate the HPR first, as you know HPR equal

Pn divided by P0, equals here we have given  Pn is equal to 330 and P0 is equal to  

320 equal 1.03, so in this way we have to compute first, the HPR then we will compute annual HPR

and annual HPY, as I mentioned the equation before, we will write first requirement annual HPR

we know HPR power 1 by n equal, HPR we have here 1.03 power 1 by 2 ,as we  

have given the value of n, I mean duration  or period of this investment is two years,  

now we have to compute, we  have here 1.015  

solve the second requirement, I mean annual  HPY, so we'll write annual HPY is equal

annual HPR minus 1 multiplied by 100, so we have here 1.015 minus 1 multiplied by 100 equal 0.015

multiplied by hundred or 1.5 percent,  

so this is the way how actually we can calculate annual HPR and annual HPY using those formula,  

thanks a lot for being with us, hopefully you'll be there in the next class, Assalamualaikum (Peace be upon you).