ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Compound interest causes your wealth to grow faster. It makes a sum of money grow at a faster rate than simple interest because you will earn returns on the money you invest, as well as on returns at the end of every compounding period.

Detailed explanation-2: -Compounding is a powerful investing concept that involves earning returns on both your original investment and on returns you received previously. For compounding to work, you need to reinvest your returns back into your account. For example, you invest $1, 000 and earn a 6% rate of return.

Detailed explanation-3: -Compound interest is what happens when the interest you earn on savings begins to earn interest on itself. As interest grows, it begins accumulating more rapidly and builds at an exponential pace. The potential effect on your savings can be dramatic.

Detailed explanation-4: -A simple definition. Compound interest makes your money grow faster because interest is calculated on the accumulated interest over time as well as on your original principal. Compounding can create a snowball effect, as the original investments plus the income earned from those investments grow together.

Detailed explanation-5: -Certificates of deposit (CDs) High-yield savings accounts. Bonds and bond funds. Money market accounts. Dividend stocks. Real estate investment trusts (REITs) 02-Aug-2022