Holding period yield (HPY) is the unannualized percentage return on an asset or portfolio of assets from purchase date to its maturity or sale equaling the sum of increase (decrease) in its value above (below) its purchase price plus any investment income to be received during the holding period. Where BDY is based on a 360‐day year, HPY is the return only over the holding period, which could be of any length. Because HPY is based on the purchase price of the investment, it is a true yield. HPY is used to compare the expected return on any kind of instrument to its actual return, where F is face value, P is purchase price and D1 is distribution of income during the holding period or at maturity:
HPY = [(F – P) + D1]/P
Given the bank discount yield (BDY), the equation for the calculation of the HPY of a t-bill or other pure discount instrument is:
HPY = BDY x (F – P)
HPY can also be determined when only the BDY and the number of days in the holding period are known as follows, where n is the number of days in the holding period:
HPY = [BDY x (n/360)]/[1 – BDY x (n/360)]
If only the money market yield (MMY) and the number of days remaining to the maturity (t) of an investment are known, HPY can be determined as follows:
HPY = MMY x t/360
If the effective annual yield (EAY) of an investment is known, the formula to solve for HPY in terms of EAY is:
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