Compound tariff

 

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Compound tariff

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



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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


 
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