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When evaluating alternative investments for inclusion into a portfolio, you often compare investments with widely different prices and lives. To properly evaluate such investments you must accurately compare their historical rates of return.
Realized rates of return are called ex-post rates of return. In contrast, ex-ante rates of return are rates of return that are expected to occur in the future. Investors may use historical rates of return to estimate future returns and risk of various securities - estimates that are needed to make portfolio investment decisions.
Two types of returns can be calculated, namely;
1. Holding period return (HPR)
2. Holding period yield (HPY)
Lellah answered the question on November 8, 2021 at 08:13
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