Compound tariff

 

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Compound tariff

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



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Compound reversionary bonus

Compound reversionary bonus

A with profits life assurance bonus, normally added annually to the policy, which is based on the profits of the life company's investments.The compound reversionary bonus is normally calculated on the sum assured (or basic sum assured) plus bonuses to date and is payable at the maturity of the policy or prior death. Once declared, reversionary bonuses are guaranteed.


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.


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.


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.


Realized compound yield

Realized compound yield

Yield assuming that coupon payments are invested at the going market interest rate at the time of their receipt and held thus until the bond matures.


Further Suggestions

Simple compound growth method
Discrete compounding
Compound option
Compound interest
Compounding period
Compounding frequency
compound interest
compound annual growth rate
Compound growth rate
Compound Annual Return
Compound interest


 
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