Explain why holding period return, as an economic measure, does not have the same significance as current yield or yield to maturity.
What will be an ideal response?
One of the things economists do is try to explain behavior, or decisions people make. Current yield and yield to maturity are a priori measures, meaning we can calculate these prior to actually making the purchase of the bond. The holding period return cannot be calculated a priori, it is only calculated after the bond is purchased; to a certain degree it represents a "sunk" cost.
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