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Compounding period

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Definition of Compounding period

Compounding Period Image 1

Compounding period

The length of the time period (for example, a quarter in the case of quarterly
compounding) that elapses before interest compounds.


compounding period

the time between each interest computation



Related Terms:

Compounding frequency

The number of compounding periods in a year. For example, quarterly
compounding has a compounding frequency of 4.


Accounting period

The period of time for which financial statements are produced – see also financial year.


Annualized holding period return

The annual rate of return that when compounded t times, would have
given the same t-period holding return as actually occurred from period 1 to period t.


Annuity Period

The time between each payment under an annuity.



Average Amortization Period

The average useful life of a company's collective amortizable asset base.


Average Collection Period

Average number of days necessary to receive cash for the sale of
a company's products. It is calculated by dividing the value of the
accounts receivable by the average daily sales for the period.


Compounding Period Image 2

Average collection period, or days' receivables

The ratio of accounts receivables to sales, or the total
amount of credit extended per dollar of daily sales (average AR/sales * 365).


Compounding

The process of accumulating the time value of money forward in time. For example, interest
earned in one period earns additional interest during each subsequent time period.


compounding

When an asset generates earnings that are then reinvested and generate their own earnings.


Continuous compounding

The process of accumulating the time value of money forward in time on a
continuous, or instantaneous, basis. Interest is earned continuously, and at each instant, the interest that
accrues immediately begins earning interest on itself.


Continuous Compounding

The process of continuously adding interest to a principal plus
interest amount and calculating the resulting compound amount


Credit period

The length of time for which the customer is granted credit.


Critical Growth Periods

Times in a company's history when growth is essential and without which survival of the business might be in jeopardy.


Discount period

The period during which a customer can deduct the discount from the net amount of the bill
when making payment.


Discounted payback period rule

An investment decision rule in which the cash flows are discounted at an
interest rate and the payback rule is applied on these discounted cash flows.


Discrete compounding

compounding the time value of money for discrete time intervals.


Discrete Compounding

The process of adding interest to a principal plus interest amount
and calculating the resulting compound amount at specific
intervals, such as monthly or annually



Evaluation period

The time interval over which a money manager's performance is evaluated.


Extended Amortization Period

An amortization period that continues beyond a long-lived asset's economic useful life.


Extended Amortization Periods

Amortizing capitalized expenditures over estimated useful lives that are unduly optimistic.


Full Credit Period

The period of trade credit given by a supplier to its customer.


Grace Period

A specific period of time after a premium payment is due during which the policy owner may make a payment, and during which, the protection of the policy continues. The grace period usually ends in 30 days.


Grace Period

Length of time during which repayments of loan principal are excused. Usually occurs at the start of the loan period.


Holding period

Length of time that an individual holds a security.


Holding period return

The rate of return over a given period.


Multiperiod immunization

A portfolio strategy in which a portfolio is created that will be capable of
satisfying more than one predetermined future liability regardless if interest rates change.


Net period

The period of time between the end of the discount period and the date payment is due.



Neutral period

In the Euromarket, a period over which Eurodollars are sold is said to be neutral if it does not
start or end on either a Friday or the day before a holiday.


Odd first or last period

Fixed-income securities may be purchased on dates
that do not coincide with coupon or payment dates. The length of the first and
last periods may differ from the regular period between coupons, and thus the
bond owner is not entitled to the full value of the coupon for that period.
Instead, the coupon is pro-rated according to how long the bond is held during
that period.


Payback Period

The number of years necessary for the net cash flows of an
investment to equal the initial cash outlay


payback period

the time it takes an investor to recoup an
original investment through cash flows from a project


payback period

Time until cash flows recover the initial investment of the project.


period cost

cost other than one associated with making or acquiring inventory


Period costs

The costs that relate to a period of time.


periodic compensation

a pay plan based on the time spent on the task rather than the work accomplished


Periodic inventory

A physical inventory count taken on a repetitive basis.


Periodic inventory system

An inventory system in which the balance in the Inventory account is adjusted for the units sold only at the end of the period.


PPF (periodic perpetuity factor)

a generalization formula invented by Abrams that is the present value of regular but noncontiguous cash flows that have constant growth to perpetuity.


Reporting period

The time period for which transactions are compiled into a set of financial statements.


Subperiod return

The return of a portfolio over a shorter period of time than the evaluation period.


T-period holding-period return

The percentage return over the T-year period an investment lasts.


Waiting period

Time during which the SEC studies a firm's registration statement. During this time the firm
may distribute a preliminary prospectus.


Waiting Period (Credit Insurance)

A specific time that must pass following the onset of a covered disability before any benefits will be paid under a creditor disability policy. (Also known as an elimination period).


Workout period

Realignment period of a temporary misaligned yield relationship that sometimes occurs in
fixed income markets.


Annual percentage yield (APY)

The effective, or true, annual rate of return. The APY is the rate actually
earned or paid in one year, taking into account the affect of compounding. The APY is calculated by taking
one plus the periodic rate and raising it to the number of periods in a year. For example, a 1% per month rate
has an APY of 12.68% (1.01^12).



 

 

 

 

 

 

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