Holding Period Return (HPR)
Total return realized over a finite holding period, including capital gain/loss and coupon income, expressed as a single percentage. Unlike YTM, makes no assumption about hold-to-maturity or coupon reinvestment.
When to use: Use to measure realized return on a bond sold before maturity. HPR is the right yardstick for trading-style fixed-income strategies where exit price and reinvested coupons drive results.
Formula
Variables
| Symbol | Name | Description | Unit |
|---|---|---|---|
| HPR | Holding Period Return | Total return realized over the holding period as a decimal | % |
| P0 | Beginning Price | Price at the start of the holding period | $ |
| P1 | Ending Price | Price at the end of the holding period | $ |
| TotalCoupons | Total Coupons Received | Sum of all coupon payments received during the holding period | $ |
Real-Life Examples
Example 1: 1-Year Hold on a 10-Year Bond
Buy a 10-year, 5% semi-annual bond at $925.61. After one year, sell at $945.00, having received two $25 coupons.
Given
Step-by-Step
7.5% one-year HPR — about 5.4% from coupon income (current yield) plus 2.1% from price appreciation as yields drifted lower. Annualized HPR for a 1-year hold equals HPR; for multi-year holds, annualize via (1+HPR)^(1/years) − 1.
Frequently Asked Questions
YTM assumes hold-to-maturity at a constant reinvestment rate. HPR uses actual exit price and actual cash received — the real-world return for a finite hold.
TotalCoupons here is the simple sum of coupons received. For a more precise HPR, replace with the future-value of reinvested coupons at actual reinvestment rates. The simple form ignores intra-period compounding on coupons.
For a hold of n years: AnnualHPR = (1 + HPR)^(1/n) − 1. For sub-year holds, the conventional approach is the same formula — though some traders prefer the simple-annualized form (HPR × 365 / days) to match short-rate quotes.