# Holding Period Return

Holding period return is the total return from the investment during the compaany’s ownership. The investment can generate two sources of income such as interest, dividend and capital gain. The income can be interest income from the bond, dividend from stock. While the capital gain happens when the selling’s market value is higher than the initial cost.

The holding period return can present in both a time-weighted or money-weighted rate of return. It enables users to compare investments in different companies.

Holding period return is the basic function for management to access the investment project. It gives the overall view of investment performance over its lifetime. Rather than access over each year’s performance, it provides the full picture of the investments.

## Holding Period Return Formula

• Income: The interest or dividend from investment
• P1: Initial Value
• P0: Ending Value

## Holding Period Return Example

Five years ago, Company A invests \$ 100,000 in the share capital of company X. Each year, the company receives a dividend from company X. Company A receives a total dividend of \$ 10,000 from the first year up to now. At the end of the year Company decides to sell all shares for \$ 120,000.

Please calculate the holding period return for these shares.

Holding Period Return =  (10,000 + 120,000 – 100,000)/100,000 = 30%

It means that company A can make 30% over the holding period of this investment.