Annualized Rate


DEFINITION of '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%.

  1. Personal Finance

    All financial decisions and activities of an individual or household, ...
  2. Unannualized

    A rate of return on an investment for a period other than one ...
  3. Annualize

    1. To convert a rate of any length into a rate that reflects ...
  4. Seasonally Adjusted Annual Rate ...

    A rate adjustment used for economic or business data that attempts ...
  5. Stated Annual Interest Rate

    The return on an investment that is expressed as a per-year percentage, ...
  6. Prime Rate

    The interest rate that commercial banks charge their most credit-worthy ...
Related Articles
  1. Investing Basics

    APR and APY: Why Your Bank Hopes You Can't Tell The Difference

    Banks use these rates to entice borrowers and investors. Find out what you're really getting.
  2. Bonds & Fixed Income

    Advanced Bond Concepts

    Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration.
  3. Active Trading

    10 Steps To Building A Winning Trading Plan

    It's impossible to avoid disaster without trading rules - make sure you know how to devise them for yourself.
  4. Mutual Funds & ETFs

    Best 3 Vanguard Funds that Track the Top 500 Companies

    Discover the three Vanguard funds tracking the S&P 500 Index, and learn about the characteristics and historical statistics of these funds.
  5. Forex Education

    Time Value Of Money: Determining Your Future Worth

    Determining monthly contributions to college funds, retirement plans or savings is easy with this calculation.
  6. Investing Basics

    A Simplified Approach To Calculating Volatility

    Volatility is sometimes greater than anticipated, but the way it’s measured can compound the problems that occur when it’s unexpected.
  7. Investing Basics

    Should You Trade Forex Or Stocks?

    Deciding whether to trade stocks, foreign exchange or futures contracts typically comes down to risk tolerance, account size and convenience.
  8. Investing Basics

    What's a Benchmark?

    A benchmark is a standard investors choose to gauge the performance of their portfolios.
  9. Investing Basics

    How MasterCard Pulled Off a Buyback

    Stock buyback refers to publicly traded companies buying back their shares from shareholders. Why would they do that?
  10. Entrepreneurship

    How To Raise Seed Capital and Grow Your Startup

    To get a business off the ground, entrepreneurs need a clear understanding of how to strategically position themselves for VC firms and angel investors.
  1. 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 Full Answer >>
  2. What is a stock split? Why do stocks split?

    All publicly-traded companies have a set number of shares that are outstanding on the stock market. A stock split is a decision ... Read Full Answer >>
  3. How do I place an order to buy or sell shares?

    It is easy to get started buying and selling stocks, especially with the advancements in online trading since the turn of ... Read Full Answer >>
  4. Is there a difference between financial spread betting and arbitrage?

    Financial spread betting is a type of speculation that involves a highly leveraged derivative product, whereas arbitrage ... Read Full Answer >>
  5. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  6. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  3. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  4. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  5. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  6. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
Trading Center