- CFA Exams
- CFA Level I Exam
- Study Session 15. Fixed Income (2)
- Reading 46. Understanding Fixed-Income Risk and Return
- Subject 7. Interest Rate Risk and the Investment Horizon

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**CFA Practice Question**

An investment of $275 grows to $400 in 3 years. The holding period return is ______.

A. 0.6875

B. 0.455

C. Neither of these answers.

**Explanation:**The holding period return (HPR) is (400 - 275) / 275 = 0.4545.

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**User Contributed Comments**
8

User |
Comment |
---|---|

tengo |
other exam questions say the holding period return is the equivalent of 1.455 - which is not given! |

lawrence |
tengo: No the HPR should not be annualized. The answer is correct. |

tabulator |
Then it should be named HPY (Holding period yield) |

0000 |
HPY is a percentage which would be 45.45%. The Holding Period Return is the percentage change in decimal format. Answer is correct. |

Fliper333 |
In CFA textbook HPR=(P1-P0+I)/P0. So now the answer 0.455 is correct. |

atemple315 |
This was almost too easy and I thought there must be something more involved...luckily my imagination for once was a bit limited and I finally got one of these annoying ones right! |

farhan92 |
i got this right in my head and calculations but i selected c o.o |

aha66 |
Am I correct if I only divided (400/275)-1 Or does it works only in this case? |