annualize

View more Business & Finance videos

Extrapolation of an occurrence lasting a limited time period to the amount or rate that would be generated in a year.
For example, an interest rate of 2 1 ⁄ 2 % per quarter would be annualized to 10%, slightly more with compounding. Sales of ice cream in July should be annualized by applying a seasonal adjustment that considers the fact that ice cream sales are higher in July than in a typical month.

Previous:	Annual Report, Annual Percentage Rate (APR), Annual Mortgage Constant
Next:	Annualwage, Annuitant, Annuitize

1. To convert a rate of any length into a rate that reflects the rate on an annual (yearly) basis. This is most often done on rates of less than one year, and usually does not take into account the effects of compounding. The annualized rate is not a guarantee but only an estimate, and its accuracy depends on the variance of the rate. This rate is also known as "annualized return" and is similar to "run rate".

2. To convert a taxation period of less than one year to an annual (yearly) basis. This helps income earners to set out an effective tax plan and manage any tax implications.

Investopedia Says:
1. For example, a security that returns 1% a month returns 12% on an annualized basis. If, however, the 12% value was computed after only one month of returns, it is not certain that the 12% will be achieved for the year.

2. For example if after the first three months of the year you earn $10,000, you simply multiply the $10,000 by four to achieve $40,000, your annualized income.

Related Links:
Banks use these rates to entice borrowers and investors. Find out what you're really getting. APR and APY: Why Your Bank Hopes You Can't Tell The Difference
Learn the basic tenets that helped this famous investor earn his fortune. Pick Stocks Like Peter Lynch

For a list of words related to annualize, see:

• Accounting - annualize: (vb) project income or expenses for full year based on results for part of year

---