Power of Compounding - Deepstash
Power of Compounding

Power of Compounding

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ALBERT EINSTEIN

“Compound interest is the 8th wonder of the world”.

ALBERT EINSTEIN

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What Is Compounding?

What Is Compounding?

finance : to pay interest on both an amount of money and the interest it has already earned.

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Formula For Compound interest

Formula For Compound interest

Compound interest = total amount of principal and interest in future (or future value) less principal amount at present (or present value)

= P [(1 + i)n – 1]

Where:

P = principal

i = nominal annual interest rate in percentage terms

n = number of compounding periods

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How Compound Interest Grows Over Time

How Compound Interest Grows Over Time

  • Compound interest can significantly boost investment returns over the long term.
  • While a $100,000 deposit that receives 5% simple annual interest would earn $50,000 in total interest over 10 years, the annual compound interest of 5% on $10,000 would amount to $62,889.46 over the same period.
  • If the compounding period were instead paid monthly over the same 10-year period at 5% compound interest, the total interest would instead grow to $64,700.95.

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IDEAS CURATED BY

CURATOR'S NOTE

Series of ideas on power or compounding in Personal Finance

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