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# Compound Annual Return

See: Compound Annual Growth Rate

Compound Annual Return

# 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