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See: Annual basis.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
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.
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