Guys, who knows what the difference is between Yields and Returns (HPY vs HPR, EAY vs EAR) besides difference in formulas?? I get so confused! Thanks
The yield’s are internal rates of returns - discount rates that equate cash flows to market prices. The returns are just collect the cash and the ending value and divide by beginning value. It would be good for your future studies if you knew the difference between those two, so you might want to think about it. In short, the IRR way assumes that you reinvest caash flows at the IRR rate. The return way says you put the cash flows in a mattress until you measure return. Edit: And people make their own definition of these things all the time, so be careful.
Thanks for such a good explanation, JoeyDVivre!!