# ECONOMICS (CBSE/UGC NET)

## ECONOMICS

### SAVING AND INVESTING

 Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Interest earned on interest gained is ____
 A compound interest B simple interest C principal D a dividend
Explanation:

Detailed explanation-1: -Interest on interest is the interest earned when interest payments are reinvested, particularly in the context of bonds. This is also known as compound interest, or compounding. Compound interest grows at a faster rate than basic interest, and it will be fastest when compounding periods are most frequent.

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 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-4: -So let’s say you invest \$1, 000 (your principal) and it earns 5 percent (interest rate or earnings) once a year (the compounding frequency). After the first year, you would have \$1, 050 – your original principal, plus 5 percent or \$50. The second year, you would have \$1, 102.50.

Detailed explanation-5: -Monthly Compound Interest Formula. Interest compounded monthly is calculated 12 times in a year. Compounded Quarterly Formula. Interest compounded quarterly is calculated four times in a year. Daily Compound Interest Formula. Annual Compound Interest Formula. 15-Jul-2021

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