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Annual Effective Yield |
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Annual effective yield See: Annual percentage yield. Annual Effective Yield The yield on an investment in one year, taking into account the effects of compounding. For example, if one has a fixed-income investment, such as certificate of deposit, that pays 3% in interest each month, the annual effective yield is more than 3% because compounding the interest adds results in a (slightly) greater return each month. In this example, the annual effective yield is calculated thusly: Annual effective yield = (1.03)^12 - 1 = .43 = 43%, where 1.03 is 1 plus the monthly interest and 12 is the number of times interest is compounded in a year. It is also known as the annual percentage yield. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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2 million interest expense increase as a result of crediting reinsurers on funds withheld in segregated trusts as collateral for reinsurance recoverables effective January 1, 2004 with an annual effective yield of 2. |
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