ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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-2: -This means, not only will you earn money on the principal amount in your account, but you will also earn interest on the accrued interest you’ve already earned. The idea of compound interest (as compared to simple interest) is fundamental to investing because it can ultimately lead to a greater return in your account.

Detailed explanation-3: -When it comes to investing, compound interest is better since it allows funds to grow at a faster rate than they would in an account with a simple interest rate. Compound interest comes into play when you’re calculating the annual percentage yield.

Detailed explanation-4: -Compound interest investments are short or long term bank-type or money market assets.