ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -In savings accounts, interest can be compounded, either daily, monthly, or quarterly, and you earn interest on the interest earned up to that point. The more frequently interest is added to your balance, the faster your savings will grow.

Detailed explanation-2: -A compound interest account pays interest on the account’s principal balance and any interest it had previously accrued. Because higher principals net higher returns, and higher returns then add to those principals, growth from compounding becomes progressively stronger with time.

Detailed explanation-3: -Certificates of deposit (CDs) and money market accounts also typically pay compound interest, and some compound daily, giving you an even higher yield. While most CD rates are locked in for the CD’s term, money market rates are variable and can change at any time.

Detailed explanation-4: -Savings accounts earn compound interest, which means the interest you earn in one period gets deposited into your account, and then in the next period, you earn interest on that interest.