What Is a Compliance Examination? The term compliance examination refers to the periodic examination of banks to make sure they operate according to consumer protection laws, fair lending statutes, and the Community Reinvestment Act. Compliance examinations are typically focused on operational areas that pose the biggest compliance risks. They specifically focus on management processes and
What Is a Composite? In the financial world, a composite is a grouping of equities, indexes, or other investment securities in a standardized way. When applied to stock prices, a composite index can provide a useful statistical measure for the performance of the overall market, a specific sector, or an industry group. Composites are also
What Is Composite Cost of Capital? Composite cost of capital is a company’s cost to finance its business, determined by and also referred to as “weighted average cost of capital” or WACC. Composite cost of capital is calculated by multiplying the cost of each capital component by its proportional weight. A company’s debt and equity, or
What Is a Composite Index? A composite index is a statistical tool that groups together many different equities, securities, or indexes in order to create a representation of overall market or sector performance. Typically, the elements of a composite index are combined in a standardized way so that large amounts of data can be presented
What Is a Composite Rate? A composite rate is an insurance premium based on the average risk profile of a group rather than the risk profile of an individual policyholder. A composite rate implies that all members of a particular group pay the same insurance premium for coverage against a specific peril. Composite rates apply
What Is Compounding? Compounding is the process in which an asset’s earnings, from either capital gains or interest, are reinvested to generate additional earnings over time. This growth, calculated using exponential functions, occurs because the investment will generate earnings from both its initial principal and the accumulated earnings from preceding periods. Compounding, therefore, differs from linear growth, where
What Is Compound Interest? Compound interest is the interest on savings calculated on both the initial principal and the accumulated interest from previous periods. “Interest on interest,” or the power of compound interest, is believed to have originated in 17th-century Italy. It will make a sum grow faster than simple interest, which is calculated only
What is Compound Probability? Compound probability is a mathematical term relating to the likeliness of two independent events occurring. Compound probability is equal to the probability of the first event multiplied by the probability of the second event. Compound probabilities are used by insurance underwriters to assess risks and assign premiums to various insurance products.
What is the Compound Return? The compound return is the rate of return, usually expressed as a percentage, that represents the cumulative effect that a series of gains or losses has on an original amount of capital over a period of time. Compound returns are usually expressed in annual terms, meaning that the percentage number
What Is a Comprehensive Glass Policy? A comprehensive glass policy is an insurance policy that covers different kinds of glass (or similar) products that can be broken or damaged. A comprehensive glass policy covers a broader range of manufactured glass products than a standard glass policy, which typically only covers plate glass. It also provides coverage
