Question

Calculate the HPR of the following investment, entered as a

percentage (Example: if your answer is 14.5%, enter 14.5 and not
0.145) Period Cashflow 0 -14100 1 3300 2 3300 3 3100 4 2800
Your

Answer 1

The Holding Period Return (HPR) of an investment considering the provided cash flows is approximately -11.35%. It is calculated by summing all cash inflows and subtracting the initial investment, then dividing by the initial investment and expressing the result as a percentage.

Step-by-step explanation:

To calculate the Holding Period Return (HPR) for an investment, you sum up all the cash flows received during the investment period along with the final value of the investment, then subtract the initial investment value, and divide the whole by the initial investment value. In this case, the cash flows are received across 4 periods after the initial investment. HPR is expressed as a percentage.

Let's compute the HPR for the given cash flows:

1. Sum up all the cash inflows: 3300 + 3300 + 3100 + 2800 = 12500
2. Find the total value by summing the initial investment and cash inflows: -14100 + 12500 = -1600
3. To find the HPR, divide the net cash inflows by the initial investment: HPR = (-1600 / 14100) * 100
4. Finally, the HPR is approximately -11.35%.