To express a variable in yearly terms even though the variable does not directly apply to a year. That is, an annualized variable has been mathematically converted to yearly terms. For example, if the
return rate on an
investment is 2% after one month, one computes the annualized return by multiplying by 12, resulting in a 24% return rate. An annualized variable is often theoretical; there is no guarantee that the return rate in the example above will be 12% if it is calculated after a month or two. Annualizing usually does not take into account the effects of
compounding.