Compound Annual Return

 

Home
Site Map
Add Term
Search
About Us
Contributors

Compound Annual Return

See: Compound Annual Growth Rate



Compound Annual Return

Similar Matches

Compound Annual Growth Rate

Compound Annual Growth Rate

Best defined by example. If you invest $100 today and make 5% in the first year and reinvest ($105) and make 8% in the second year, the compound annual growth rate is 6.489%. The calculation is $100x1.05x1.08=$113.4 which is what you end up with at the end of year two. The average return is [square root(113.4/100) -1]= 0.06489 or 6.489%. Note 1. If we had three compounding periods we would take the cubic root (power of 1/3). Note 2. If we had invested at exactly 6.489 in both periods, we get $100x1.06489x1.06489=$113.4. Note 3. The example is directed to a return - but CAGR could be applied to earnings growth, GDP growth, etc.


Discrete compounding

Discrete compounding

Compounding the time value of money for separate time intervals.


Compound annual growth rate

Compound annual growth rate

The average rate at which a particular financial parameter compounds up over a period of years.


Continuous compounding

Continuous compounding

The process of accumulating the time value of money forward in time on a continuous, or instantaneous, basis. Interest is earned constantly, and at each instant, the interest that accrues immediately begins earning interest on itself.


Compound interest

Compound interest

The interest paid on the principal balance in a mortgage and on the accrued and unpaid interest of the loan.


Further Suggestions

Realized compound yield
Simple compound growth method
Compounding frequency
Compound interest
Compound growth rate
Compounding
Compound tariff
compound interest
compound reversionary bonus
Compound option
Compounding period


 
All rights Reserved. Do not copy without permission.