Compounding
Compounding applies each period's return to an updated balance, with frequency, cash flows, volatility, fees, and debt terms shaping the result.
Investment terms for compounding, effective rates, reinvestment assumptions, and doubling-time rules.
Compounding, Effective Rates, and Reinvestment terms explain how investment results are measured, compared, annualized, compounded, distributed, or translated into yield language.
Use this branch when the question depends on the exact return formula, time period, reinvestment assumption, fee treatment, tax treatment, or income-versus-price return split.
| Term | Use it for |
|---|---|
| Compounding | Applies each period’s return, charge, and cash flow to an updated balance. |
| Effective Interest Rate | Distinguishes annual compounding conversion from the accounting yield used for amortized cost. |
| Effective Yield | Converts periodic compounding to an annual yield while distinguishing bond, deposit, fund, and realized-return conventions. |
| Reinvestment Rate | Measures or assumes the return earned on coupons, distributions, principal repayments, or other interim cash flows. |
| Rule of 69.3 | Estimates doubling time under continuous compounding by dividing 69.3 by the percentage rate. |
Check the formula, measurement period, compounding convention, cash-flow timing, reinvestment assumption, fees, taxes, currency, and whether the result is historical, expected, quoted, or realized.
This page is educational and does not recommend a specific investment strategy, security, tax treatment, or account choice.
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Compounding applies each period's return to an updated balance, with frequency, cash flows, volatility, fees, and debt terms shaping the result.
Effective interest rate can mean an annual compounding conversion or the accounting yield used to calculate interest and amortized cost.
Effective yield usually annualizes compounding, but the label varies across deposits, bonds, and funds. Learn the formula, example, and limitations.
The reinvestment rate is earned or assumed on interim cash flows and affects terminal wealth, while differing from the original coupon rate or quoted yield.
The Rule of 69.3 estimates doubling time from a constant continuously compounded rate and differs from shortcuts used for periodic compounding.