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Im looking at buying a new 21.5" iMac.

I want to connect 2x external 1080p or 4k displays to this, these displays will have either HDMI or DVI conncetion.

I notice that there is 1x mini display output on the iMac so i can use a convertor to use that for 1x display. But what should i use for the second external display ?

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According to the specifications on Apple.com iMacs have...

Two Thunderbolt 3 (USB-C) ports with support for:

DisplayPort
Thunderbolt (up to 40 Gbps)
USB 3.1 Gen 2 (up to 10 Gbps)
Thunderbolt 2, HDMI, DVI, and VGA supported using adapters (sold separately)

So the adapters you need (sold by Apple or lots of other places) will have USB-C on one end and whatever connector your monitors have available on the other.

Apple sells some nice LG displays that have USB-C video connectors but you may not need something like that in price, performance or color fidelity depending on your specific needs. A less expensive monitor might suit you fine. I would look for ones with Displayport (mini or otherwise) and/or HDMI as you will have smaller connectors and an all digital path for the video signal.

Monitors often come with cables already, select your adapters to connect to the cables your monitor comes with or recommends.

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