Explanation:
The holding period return (HPR) is calculated as follows:
where: price per share at the end of time period cash distributions received during time period .
Here, HPR = , or 12.50%.
Since the holding period is exactly one year, the annualized return is the same as the holding period return: 12.5%.
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An investor sold a 30-year bond at a price of $850 after he purchased it at $800 a year ago. He received $50 of interest at the time of the sale. The annualized holding period return is:
A
6.25%.
B
15.0%.
C
12.5%.
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