Holding Period Return
In the CFAI text, it shows HPR with two formulas:
r = Dividend Yield + Price Appreciation, [(Div + Price1)/Price0] - 1
Then it restates that it could be thought of as
E(r) = required return + convergence of price to value, such that E(r) = r + [(V0-P0)/P0], where V0 is the intrinsic value
I understand the first formula, but the second formula is tripping me up as we’re adding the required return on top of the original HPR formula…
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