Maintaining Duration Return/Yield: Definition, Parts, and Example

What Is the Maintaining Duration Return/Yield?

Maintaining period return is the entire return won from keeping up an asset or portfolio of belongings over a time period, known as the keeping up period, generally expressed as a percentage. Maintaining period return is calculated on the basis of total returns from the asset or portfolio (income plus changes in value). It is specifically useful for comparing returns between investments held for quite a lot of categories of time.

The Parts for Maintaining Duration Return Is

Maintaining Duration Return (HPR) and annualized HPR for returns over a few years can be calculated as follows:


$\begin{array}{cc}& \text{Maintaining Duration Return}\end{array}$

get started{aligned}&textit{Maintaining Duration Return}&qquad=frac{textit{Income }+(textit{End Of Duration Price }-textit{ Initial Price})}{textit{Initial Price}} end{aligned} ​Maintaining Duration Return​

Returns computed for traditional time categories comparable to quarters or years can be reworked to a keeping up period return as well.

Figuring out Maintaining Duration Return

Maintaining period return is thus the entire return won from keeping up an asset or portfolio of belongings over a specified time period, generally expressed as a percentage. Maintaining period return is calculated on the basis of total returns from the asset or portfolio (income plus changes in value). It is specifically useful for comparing returns between investments held for quite a lot of categories of time.

Starting on the day after the safety’s acquisition and continuing until the day of its disposal or sale, the keeping up period determines tax implications. For instance, Sarah bought 100 shares of stock on Jan. 2, 2016. When working out her keeping up period, she begins depending on Jan. 3, 2016. The third day of each and every month after that counts as the start of a brand spanking new month, regardless of what choice of days each and every month incorporates.

If Sarah introduced her stock on Dec. 23, 2016, she would realize a brief capital succeed in or capital loss because of her keeping up period isn’t as much as three hundred and sixty five days. If she sells her stock on Jan. 3, 2017, she would realize a long-term capital succeed in or loss because of her keeping up period is a few 365 days.

Example of Maintaining Duration Return/Yield

The following are some examples of calculating keeping up period return:

1. What is the HPR for an investor, who bought a stock a 365 days previously at $50 and won $5 in dividends over the 365 days, if the stock is now purchasing and promoting at $60?


$\begin{array}{c}HPR=\frac{5+(60-50)}{50}=30\%\end{array}$

get started{aligned}HPR=frac{5+(60-50)}{50}=30p.cend{aligned} HPR=505+(60−50)​=30%​

2. Which investment performed upper: Mutual Fund X, which was held for three years and appreciated from $100 to $150, providing $5 in distributions, or Mutual Fund B, which went from $200 to $320 and generated $10 in distributions over 4 years?


$\begin{array}{cc}& \text{HPR for Fund X}=\frac{5+(150-100)}{100}=55\%\end{array}$

get started{aligned}&textit{HPR for Fund X}=frac{5+(150-100)}{100}=55%[+.010pt]&textit{HPR for Fund B}=frac{10+(320-200)}{200}=65p.cend{aligned} ​HPR for Fund X=1005+(150−100)​=55%​

Remember: Fund B had the higher HPR, however it was held for 4 years, as opposed to the three years for which Fund X was held. Given that time categories are different, this requires annualized HPR to be calculated, as confirmed underneath.

3. Calculation of annualized HPR:


$\begin{array}{cc}& \text{Annualized HPR for Fund X}\\ & =(0.55+1{)}^{1/3}-1=15.73\%\\ & \text{Annualized HPR for Fund B}\end{array}$

get started{aligned}&textit{Annualized HPR for Fund X}&qquad=(0.55+1)^{1/3}-1=15.73%&textit{Annualized HPR for Fund B}&qquad=(0.65+1)^{1/4}-1=13.34p.cend{aligned} ​Annualized HPR for Fund X=(0.55+1)1/3−1=15.73%Annualized HPR for Fund B​

Thus, regardless of having the lower HPR, Fund X was the superior investment.

4. Your stock portfolio had the following returns inside the 4 quarters of a given 365 days: +8%, -5%, +6%, +4%. How did it read about against the benchmark index, which had total returns of 12% over the 365 days?


$\begin{array}{cc}& \text{HPR for your stock portfolio}\\ & =\left[\right(1+0.08)\times (1-0.05)\times (1+0.06)\times (1+0.04\left)\right]\end{array}$

get started{aligned}&textit{HPR to your stock portfolio}&qquad=[(1+0.08)times(1-0.05)times(1+0.06)times(1+0.04)]&qquadquad-1=13.1p.cend{aligned} ​HPR for your stock portfolio=[(1+0.08)×(1−0.05)×(1+0.06)×(1+0.04)]​

Your portfolio, because of this reality, outperformed the index by means of more than a percentage degree. (However, the risk of the portfolio should also be compared to that of the index to pass judgement on if the added return was generated by means of taking significantly higher risk.)