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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None of the above
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Detailed explanation-1: -Compound interest is when the interest you earn on a balance in a savings or investing account is reinvested, earning you more interest. As a wise man once said, “Money makes money. And the money that money makes, makes money.” Compound interest accelerates the growth of your savings and investments over time.
Detailed explanation-2: -Compound interest makes a sum of money grow at a faster rate than simple interest, because in addition to earning returns on the money you invest, you also earn returns on those returns at the end of every compounding period, which could be daily, monthly, quarterly or annually.
Detailed explanation-3: -Compound interest is best defined as: a type of debt that a company issues to investors for a specified period of time.
Detailed explanation-4: -The major ingredient in the compound interest formula is time, said Sam Renick, who runs Los Angeles-based It’s A Habit Co., which promotes children’s financial education. “The longer the money remains deposited or invested, the greater and more magical the compounding effect, ” he said.