ECONOMICS
SAVING AND INVESTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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interest earned on the principal investment
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Any form of interest earned from saving or investing
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Earning interest on interest
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The effect interest has on the total return on investment
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Detailed explanation-1: -Compound interest is the interest on a deposit calculated based on both the initial principal and the accumulated interest from previous periods. Or, more simply put, compound interest is interest you earn on interest . You can compound interest on different frequency schedules such as daily, monthly or annually.
Detailed explanation-2: -What is compound interest? Compound interest is the interest you earn on interest. In short, you make an initial investment and receive a particular rate of return your first year which then multiplies year over year depending on the interest rate received.
Detailed explanation-3: -Compound interest is the interest you earn on interest. This can be illustrated by using basic math: if you have $100 and it earns 5% interest each year, you’ll have $105 at the end of the first year. At the end of the second year, you’ll have $110.25.
Detailed explanation-4: -Key Takeaways. Compound interest is interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods. Generating “interest on interest” is known as the power of compound interest.