Compound Net Annual Rate - CNAR

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Compound Annual Growth Rate - CAGR

    The year-over-year growth rate of an investment over a specified ...
  2. Average Annual Growth Rate - AAGR

    The average increase in the value of an individual investment ...
  3. Time-Weighted Rate of Return

    A measure of the compound rate of growth in a portfolio. Because ...
  4. Rate Of Return

    The gain or loss on an investment over a specified period, expressed ...
  5. Compound Return

    The rate of return, usually expressed as a percentage, that represents ...
  6. Average Return

    The simple mathematical average of a series of returns generated ...
Related Articles
  1. Active Trading Fundamentals

    Charting Your Way To Better Returns

    Learn about the powerful hybrid techniques that take advantage of both technical and fundamental analysis.
  2. Bonds & Fixed Income

    Find The Highest Returns With The Sharpe Ratio

    Learn how to follow the efficient frontier to increase your chances of successful investing.
  3. Active Trading Fundamentals

    Efficient Market Hypothesis: Is The Stock Market Efficient?

    Deciding whether it's possible to attain above-average returns requires an understanding of EMH.
  4. Options & Futures

    Find Quality Investments With ROIC

    Return on invested capital is a great way to measure the true value produced by a company. Learn to use the ROIC metric and increase your chances of finding successful investments.
  5. Fundamental Analysis

    The Equity-Risk Premium: More Risk For Higher Returns

    Learn how the expected extra return on stocks is measured and why academic studies usually estimate a low premium.
  6. Delivery duty paid (DDP) is a shipping term.
    Investing

    What does DDP Mean?

    Delivery duty paid (DDP) is a shipping term specifying that the seller is responsible for all costs associated with delivery of the goods to the buyer. It is usually used when goods are exported ...
  7. Fundamental Analysis

    What is a good interest coverage ratio?

    Learn the importance of the interest coverage ratio, one of the primary debt ratios analysts use to evaluate a company's financial health.
  8. Fundamental Analysis

    What is a bad interest coverage ratio?

    Understand how interest coverage ratio is calculated and what it signifies, and learn what market analysts consider to be an unacceptably low coverage ratio.
  9. Active Trading Fundamentals

    What is liquidity risk?

    Learn how to distinguish between the two broad types of financial liquidity risk: funding liquidity risk and market liquidity risk.
  10. Technical Indicators

    What is a good gearing ratio?

    Understand the meaning of the gearing ratio, how it is calculated, the definition of high and low gearing, and how they reflect relative financial stability.

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center