Corporate Finance

Effective Annual Yield – Definition, Formula, and Example

Effective annual yield (EAY) or effective annual rate (EAR) considers the compounding effect of return on investment. It provides a realistic annual interest rate of an investment rather than the simple nominal rate. Investors can use the EAY to calculate the actual return on investment. They can also use the EAR to evaluate whether a …

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Capitalization-Weighted Index: What Is It and How to Calculate?

Stock market indices are typically used to measure the performance of a particular stock market and with each component or segment benchmarking their performance against it. A capitalization-weighted index is a similar concept that accounts for each component of the index with respect to its market capitalization. Market capitalization (or simply market cap) is a …

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