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. Compound Return

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

    The simple mathematical average of a series of returns generated ...
  5. Rate Of Return

    The gain or loss on an investment over a specified period, expressed ...
  6. Time-Weighted Rate of Return

    A measure of the compound rate of growth in a portfolio. Because ...
RELATED FAQS
  1. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  2. Should investors focus more on the current yield or face value of a bond?

    Whether investors should focus more on a bond's current yield or face value largely depends on the end goals of the investments. ... Read Full Answer >>
  3. How can I find net margin by looking a company's financial statements?

    In finance and accounting, financial statements represent the fundamental means of analyzing a company's financial position, ... Read Full Answer >>
  4. What can working capital turnover ratios tell a trader?

    A company's working capital turnover ratio is traditionally positively correlated with business performance. A high, or better ... Read Full Answer >>
  5. How do I calculate the expected return of my portfolio in Excel?

    The expected return of your portfolio can be calculated using Microsoft Excel if you know the expected return rates of all ... Read Full Answer >>
  6. What is a negative write-off?

    A negative write-off is a write-off conducted by a company or accountant after deciding not to pay back an individual or ... Read Full Answer >>
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. Bonds & Fixed Income

    What are Floating-Rate Notes?

    A floating-rate note is a debt instrument with an interest rate that “floats,” or varies. They are also called floaters.
  7. Fundamental Analysis

    Explaining the Common Size Income Statement

    A common size income statement expresses each account as a percentage of net sales.
  8. Professionals

    What Does an Auditor Do?

    An auditor ensures that organizations maintain accurate and honest financial records.
  9. Fundamental Analysis

    Calculating the Net Debt to EBITDA Ratio

    Financial analysts typically use the net debt to EBITDA ratio to determine a company’s ability to pay its debt.
  10. Economics

    How Does an Operating Lease Work?

    Operating lease is a term used mostly in accounting to denote a lease that gives the lessee rights to use and operate an asset without ownership.

You May Also Like

Hot Definitions
  1. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  2. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  3. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  4. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  5. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
  6. Touchline

    The highest price that a buyer of a particular security is willing to pay and the lowest price at which a seller is willing ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!