Holding period yield (HPY): (a) What is meant by HPY, and how does it differ from yield to…

Holding period yield (HPY):

(a) What is meant by HPY, and how does it differ from yield to maturity?

(b) A 90-day discount security with a face value of $500000 is purchased to yield 8.23 per cent per annum. After 55 days it is sold at a yield of 8.45 per cent per annum. What is the HPY for the original purchaser?

(c) An existing discount security, with a face value of $750000 and with 60 days to maturity, was purchased at a yield of 8.15 per cent per annum. After 21 days it is sold at a yield of 8.50 per cent per annum. What is the rate of return earned over the 21-day holding period?

(d) The new holder of the security in (c) above sells it into the money market after 7 days at the current yield of 7.90 per cent per annum.

i. What is the holding period yield received by the seller?

ii. If the buyer holds the security to maturity, what is the holding period yield?