Compound Net Annual Rate - CNAR

DEFINITION of 'Compound Net Annual Rate - CNAR'

The return on an investment after taking tax implications into consideration. The compound net annual rate (CNAR) is much like an investment's compound annual rate except that tax liability is taken into account. CNAR is a truer representation of investment returns because it illustrates investors' actual return after taxation, rather than just unrealized gains or losses.

BREAKING DOWN 'Compound Net Annual Rate - CNAR'

For example, if an investor invests $1,000 in a one-year certificate of deposit (CD) with an interest rate of 5% paid annually, their expected annual return on this investment is $50. However, if interest income is taxed at 30%, the investor's compound net annual rate of return is actually 3.5%, or $35 ($50 x $0.70). As you can see, CNAR gives a much more accurate real return for an investor.

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