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%.

RELATED TERMS
  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. Stated Annual Interest Rate

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

    The interest rate that commercial banks charge their most credit-worthy ...
  6. Seasonally Adjusted Annual Rate ...

    A rate adjustment used for economic or business data that attempts ...
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. Stock Analysis

    If You Had Invested Right After Berkshire Hathaway's IPO (BRK.A)

    Learn how much you would now have if you had invested right after Berkshire Hathaway's IPO, and find out the classes of shares that you could invest in.
  4. Stock Analysis

    Is Now the Right Time to Buy Coty? (COTY)

    Find out whether fragrance and color cosmetics powerhouse Coty deserves a place in your portfolio. Will recent acquisitions help turn the company around?
  5. Investing Basics

    5 Common Mistakes Young Investors Make

    Missteps are common whenever you’re learning something new. But in investing, missteps can have serious financial consequences.
  6. Investing Basics

    5 Questions First Time Investors Should Ask in 2016

    Learn five of the most important questions you need to ask if you are a new investor planning on starting an investment program in 2016.
  7. Stock Analysis

    The Biggest Risks of Investing in Verizon Stock (VZ)

    Read about some of the biggest risks of investing in Verizon stock. While the company has a good dividend and value pricing, there are risks.
  8. Mutual Funds & ETFs

    The 3 Best American Funds for Value Investors in 2016

    Learn about value investing and how interest rate hikes benefit mutual funds, and the top three American Funds mutual funds for value investors.
  9. Investing Basics

    How to Pick A Stock

    The first step in picking stock is to determine your goals.
  10. Mutual Funds & ETFs

    How to Build Your Own Mutual Fund

    Here are some tips for building a mutual fund that may help pave the way to a strong performance.
RELATED FAQS
  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 finance?

    "Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Full Answer >>
  3. What is the 'Rule of 72'?

    The 'Rule of 72' is a simplified way to determine how long an investment will take to double, given a fixed annual rate of ... Read Full Answer >>
  4. 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 >>
  5. 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 >>
  6. Is there a difference between financial spread betting and arbitrage? (AAPL, NFLX)

    Financial spread betting is a type of speculation that involves a highly leveraged derivative product, whereas arbitrage ... Read Full Answer >>
Hot Definitions
  1. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  2. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  3. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  4. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  5. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
Trading Center