Annualized Rate

What is an 'Annualized Rate'

A rate of return for a given period that is less than one year, but that is computed as if the rate were for a full year. The annualized rate is essentially an estimated rate of annual return that is extrapolated mathematically.
 

BREAKING DOWN 'Annualized Rate'

The annualized rate is calculated by multiplying the change in rate of return in one month by 12 (or one quarter by four).

For example, if one month's rate of return is 0.25% and the next month's is 0.35%, the change in the rate of return from one month to the next is 0.10% (0.35-0.25). The annualized rate of return is equal to 0.10% x 12 = 1.2%.

RELATED TERMS
  1. Annualize

    1. To convert a rate of any length into a rate that reflects ...
  2. Yearly Rate Of Return Method

    More commonly referred to as annual percentage rate. It is the ...
  3. Effective Annual Interest Rate

    Effective Annual Interest Rate is an investment's annual rate ...
  4. Annualized Total Return

    The average amount of money earned by an investment each year ...
  5. Annual Return

    The return an investment provides over a period of time, expressed ...
  6. Run Rate

    1. How the financial performance of a company would look if you ...
Related Articles
  1. Professionals

    Introduction

    FINRA/NASAA Series 66: Section 2 Measuring Portfolio Returns. This section discusses different return measures: return on investment, holding period, annualized, risk free and total returns.
  2. Term

    What's a Real Rate of Return?

    A real rate of return is an annual percentage investment return that’s adjusted for inflation, taxes or other factors.
  3. Professionals

    Rates of Return

    FINRA/NASAA Series 66 Section 1 - Rates of Return. In this section internal rate of return (IRR), real return, expected return and risk-adjusted return.
  4. Professionals

    Measuring Portfolio Returns

    NASAA Series 65: Section 16 Measuring Portfolio Returns. In this section different types of risk measures discussed and some sample questions.
  5. Professionals

    How To Measure Returns On The Series 65 Exam

    An investor who is evaluating the performance of a portfolio manager must take into consideration the impact that any contributions or withdrawals made by the investor will have on the overall ...
  6. Investing

    What's a Run Rate?

    Run rate is a term used to denote annualized earnings extrapolated from a shorter time frame. Management uses the run rate to estimate future revenues.
  7. Investing Basics

    What's the Rate of Return?

    Rate of return is the earnings an asset generates in excess of its initial cost. The amount is usually expressed as an annualized percentage rate. Rate of return can be calculated based on the ...
  8. Fundamental Analysis

    Explaining Annual Returns

    Annual return is the standard percentage rate for most investments and credit facilities.
  9. Fundamental Analysis

    How To Calculate Your Investment Return

    How much are your investments actually returning? Find out why the method of calculation matters.
  10. Fundamental Analysis

    The Most Accurate Way To Gauge Returns: The Compound Annual Growth Rate

    The compound annual growth rate, or CAGR for short, represents one of the most accurate ways to calculate and determine returns for individual assets, investment portfolios and anything that ...
RELATED FAQS
  1. What is the difference between a company's annual return and its annualized return?

    Understand the importance of calculating a company's annual return and its annualized return, and learn the differences between ... Read Answer >>
  2. How is the expected market return determined when calculating market risk premium?

    Find out how the expected market return rate is determined when calculating market risk premium and how these figures are ... Read Answer >>
  3. What annual return could an investor expect on average from the drug sector?

    Learn which annual average returns the drugs manufacturing sector and its industries can generate for investors based on ... Read Answer >>
  4. The real rate of return is the amount of interest earned over and above the:

    a. discount rate. b. tax rate. c. inflation rate. d. risk-free rate of return. Answer: C Since the real rate of return measures ... Read Answer >>
  5. When do I need to project run rates for my business?

    Learn some of the reasons why businesses project run rates; discover why companies rely on such a simple metric and how it ... Read Answer >>
  6. What is the difference between stated annual return and effective annual return?

    Essentially, the effective annual return accounts for intra-year compounding, and the stated annual return does not. The ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center