 # Compound tariff Home  Site Map  Add Term  Search  About Us  Contributors # Compound tariff

A tariff that combines both a specific and an ad valorem component.

# Compounding

Compounding

The process of accumulating the time value of money forward in time. For example, interest earned in one period earns additional interest during each subsequent time period.

# Compound Annual Return

Compound Annual Return

See: Compound Annual Growth Rate

# Simple compound growth method

Simple compound growth method

Calculating a growth rate by relating terminal value to initial value and assuming a constant percentage annual rate of growth between the two values.

# Compound interest

Compound interest

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

# 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.

# Further Suggestions

Compounding frequency
Discrete compounding
compound interest
Compound growth rate
compound annual growth rate
Compound option
Continuous compounding
Compound interest
compound reversionary bonus
Compounding period
Realized compound yield