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.

RELATED TERMS
  1. Compound Return

    The rate of return, usually expressed as a percentage, that represents ...
  2. Effective Annual Interest Rate

    Effective Annual Interest Rate is an investment's annual rate ...
  3. Stated Annual Interest Rate

    The return on an investment that is expressed as a per-year percentage, ...
  4. Compound Interest

    Compound Interest is interest calculated on the initial principal ...
  5. Annualize

    1. To convert a rate of any length into a rate that reflects ...
  6. Discrete Compounding

    Discrete compounding refers to the method by which interest is ...
Related Articles
  1. Managing Wealth

    Overcoming Compounding's Dark Side

    Understanding how money is made and lost over time can help you improve your returns.
  2. Investing

    How To Calculate Your Investment Return

    How much are your investments actually returning? Find out why the method of calculation matters.
  3. Markets

    How does Compound Interest Work?

    A quick way to understand the impact of compound interest is to ask yourself if you’d rather receive $100,000 a day for a month, or start with a penny on day one and double it every day for those ...
  4. Markets

    The Effective Annual Interest Rate

    The effective annual interest rate is a way of restating the annual interest rate so that it takes into account the effects of compounding.
  5. Managing Wealth

    Learn Simple And Compound Interest

    Interest is defined as the cost of borrowing money, and depending on how it is calculated, can be classified as simple interest or compound interest.
  6. Trading

    Compound Annual Growth Rate (CAGR)

    The compound annual growth rate is an important tool for measuring investment performance and comparing it across asset classes. Discover how it is calculated and how it can inform your investment ...
  7. Markets

    How Interest Rates Work on Savings Accounts

    Here's what you need to know to grow your rainy-day fund.
  8. Investing

    Understanding Compound Interest

    Compound interest is often called one of the most powerful concepts in finance. Find out what it is and how it can work for you.
  9. Investing

    Calculating Annualized Total Return

    The annualized total return is the average return of an investment each year over a given time period.
  10. Personal Finance

    Capital Gains Tax 101

    Find out how taxes are applied to your investment returns and how you can reduce your tax burden.
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 Answer >>
  2. What formula can I use to calculate interest on interest?

    Find out more about compounding interest, what it measures and how to calculate the amount of compound interest accrued using ... Read Answer >>
  3. Other than my savings account, what other types of holdings compound my interest?

    Understand the benefits of compounding interest, and learn the types of investments that offer compounding in addition to ... Read Answer >>
  4. How often is interest compounded?

    Understand what compound interest is and how the compounding of interest applies to the benefit of investors or creditors, ... Read Answer >>
  5. What is the difference between a company's annual return and its annualized return?

    Understand the importance of calculating a company's annual return and its annualized return, and learn the differences between ... Read Answer >>
  6. How do I use the rule of 72 to calculate continuous compounding?

    Find out why the rule of 72 does not accurately reflect the growth caused by continuous compounding, and which number can ... Read Answer >>
Hot Definitions
  1. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  2. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  3. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  4. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  5. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
  6. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is ...
Trading Center