{"id":125,"date":"2019-08-17T13:28:00","date_gmt":"2019-08-17T13:28:00","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=125"},"modified":"2026-04-03T13:58:36","modified_gmt":"2026-04-03T13:58:36","slug":"holding-period-return-example-question","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/quantitative-methods\/holding-period-return-example-question\/","title":{"rendered":"Holding Period Return"},"content":{"rendered":"\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"VideoObject\",\n  \"name\": \"Discounted Cash Flow Applications (2019 Level I CFA\u00ae Exam \u2013 Reading 7)\",\n  \"description\": \"The video lesson covers discounted cash flow applications, including capital budgeting techniques like NPV and IRR for evaluating investments and projects. It explains the calculation and interpretation of holding period returns, money-weighted and time-weighted returns, and various yields (e.g., bank discount, effective annual, and bond equivalent). Practical examples highlight these concepts.\",\n  \"uploadDate\": \"2019-06-06T00:00:00+00:00\",\n  \"thumbnailUrl\": \"https:\/\/example.com\/path-to-thumbnail.jpg\", \n  \"contentUrl\": \"https:\/\/www.youtube.com\/watch?v=lYpi92G13U4\",\n  \"embedUrl\": \"https:\/\/www.youtube.com\/embed\/lYpi92G13U4\",\n  \"duration\": \"PT27M31S\"\n}\n<\/script>\n\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"QAPage\",\n  \"mainEntity\": {\n    \"@type\": \"Question\",\n    \"name\": \"Calculate the holding period return for a Treasury bill investment\",\n    \"text\": \"A chartered analyst purchased a treasury bill for $960 and then sold it for $995 three months later. Calculate the holding period return.\",\n    \"answerCount\": 3,\n    \"acceptedAnswer\": {\n      \"@type\": \"Answer\",\n      \"text\": \"The holding period return is 3.6%. It is calculated as (995 \u2212 960) \/ 960 = 35 \/ 960 = 0.036 or 3.6%.\",\n      \"dateCreated\": \"2025-12-19\",\n      \"upvoteCount\": 1\n    },\n    \"suggestedAnswer\": [\n      {\n        \"@type\": \"Answer\",\n        \"text\": \"35%\",\n        \"upvoteCount\": 0\n      },\n      {\n        \"@type\": \"Answer\",\n        \"text\": \"0.35\",\n        \"upvoteCount\": 0\n      }\n    ]\n  }\n}\n<\/script>\n\n\n\n<iframe loading=\"lazy\"\n  width=\"611\"\n  height=\"344\"\n  src=\"https:\/\/www.youtube.com\/embed\/lYpi92G13U4\"\n  title=\"YouTube video player\"\n  frameborder=\"0\"\n  allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\"\n  referrerpolicy=\"strict-origin-when-cross-origin\"\n  allowfullscreen>\n<\/iframe>\n\n\n\n<p>Holding period return refers to the change in the value of an investment over the period it is held, expressed as a percentage of the originally invested amount. It also captures any additional income that one earns from an investment.<\/p>\n\n\n\n<p>$$ \\text{HPR} =\\cfrac { (\\text{Ending value} \u2013 \\text{beginning value} + \\text{asset income}) }{ \\text{beginning value} } $$<\/p>\n\n\n\n<p>Ending value is simply the value of the investment at the end of the period. Beginning value is simply the amount invested at the start of the period. Asset income is any additional benefit received by the investor during the period of investment, e.g. dividends from shares.<\/p>\n\n\n\n<p>If we let:<\/p>\n\n\n\n<p>beginning value to be P<sub>0<\/sub>,<\/p>\n\n\n\n<p>Ending value to be P<sub>1<\/sub><\/p>\n\n\n\n<p>Asset income to be D,<\/p>\n\n\n\n<p>Then we can shorten the formula above to:<\/p>\n\n\n\n<p>$$<br>\\text{HPR} =\\cfrac { (P_1 &#8211; P_0 + D) }{ P_0 } $$<\/p>\n\n\n\n<div style=\"margin: 30px 0;\">\n  <a href=\"https:\/\/analystprep.com\/free-trial\/\" target=\"_blank\" rel=\"noopener noreferrer\"\n     style=\"display:block;\n            width:100%;\n            padding:16px 20px;\n            border:2px solid #2f6fed;\n            border-radius:999px;\n            background:#f2f4f8;\n            color:#2f6fed;\n            font-size:16px;\n            font-weight:500;\n            text-decoration:none;\n            text-align:center;\n            line-height:1.2;\">\n    Access our CFA free trial for return calculation practice\n  <\/a>\n<\/div>\n\n\n<h2><strong>Example<\/strong><\/h2>\n<p>Five years ago, Matthew paid $14 per share for 200 shares in XYZ insurance company. The current share price has grown by 50% of the purchase price. So far, he has received 12 dividend payments, each amounting to $0.05 per share. If Matthew decides to sell the shares at present, what will be the holding period return?<\/p>\n<p>First, we establish values of P<sub>0<\/sub>, P<sub>1<\/sub>, and D:<\/p>\n<p>P<sub>0<\/sub> = 14 * 200 = 2800<\/p>\n<p>P<sub>1<\/sub> = 1.5 * 14 * 200 = 4200<\/p>\n<p>D = 0.05 * 200 * 12 = 120<\/p>\n<p>Therefore,<br \/>\\( \\text {Holding period return} = \\cfrac {(4200 \u2013 2800 + 120)}{2800} = 54.3\\%\\)<\/p>\n<p>We can use the holding period return to find the true investment return per every unit of money e.g. per unit dollar. This is because it incorporates all the additional income received. It can also be used to determine any loss from an investment. In such a scenario, HPR would be negative.<\/p>\n<blockquote>\n<h2><strong>Question<\/strong><\/h2>\n<p>A chartered analyst purchased a treasury bill for $960 and then sold it for $995 three months later. Calculate the holding period return.<\/p>\n<p>A. 35%<\/p>\n<p>B. 35<\/p>\n<p>C. 3.6%<\/p>\n<p><strong>Solution<\/strong><\/p>\n<p>The correct answer is C.<\/p>\n<p>First, we establish our key values:<\/p>\n<p>P<sub>0<\/sub> = 960<\/p>\n<p>P<sub>1<\/sub> = 995<\/p>\n<p>D = 0 in this case<\/p>\n<p>Therefore,<\/p>\n<p>$$ \\begin{align*}<br \/>\\text{HPR} &amp; =\\cfrac {995 \u2013 960}{960} \\\\<br \/>&amp; =\\cfrac {35}{960} = 3.6\\% \\\\<br \/>\\end{align*} $$<\/p>\n<\/blockquote>\n<p><em>Reading 7 LOS 7c<\/em><\/p>\n<p><em>Calculate and interpret a holding period return (Total return)<\/em><\/p>\n<div class=\"notes_inv\"><hr \/>\n<p><a href=\"https:\/\/analystprep.com\/cfa-level-1-exam\/quantitative-methods\/learning-sessions-curriculum\/\"><em>Quantitative Methods \u2013 Learning Sessions<\/em><\/a><\/p>\n<div style=\"text-align: center; margin: 40px 0;\"><a style=\"display: inline-flex; align-items: center; justify-content: center; padding: 12px 20px; border-radius: 999px; background-color: #1a73e8; color: #ffffff; text-decoration: none; font-weight: 600;\" href=\"https:\/\/analystprep.com\" target=\"_blank\" rel=\"noopener\"> Start Free Trial \u2192 <\/a>\n<p style=\"font-size: 15px; margin-top: 12px; color: #555;\">Practice total return calculations, including price changes and income, with exam-style questions.<\/p>\n<\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>Holding period return refers to the change in the value of an investment over the period it is held, expressed as a percentage of the originally invested amount. It also captures any additional income that one earns from an investment&#8230;.<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[2],"tags":[],"class_list":["post-125","post","type-post","status-publish","format-standard","hentry","category-quantitative-methods","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Holding Period Return (HPR) Example | CFA Level 1<\/title>\n<meta name=\"description\" content=\"Holding Period Return (HPR) measures the percentage change in an investment&#039;s value during the holding period. 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