Fundraise on MathsGee
First time here? Checkout the FAQs!
x

*Math Image Search only works best with zoomed in and well cropped math screenshots. Check DEMO

0 like 0 dislike
129 views
What is compound interest?
in Economics and Finance by Diamond (58,497 points) | 129 views

1 Answer

0 like 0 dislike
Best answer
Interest increases whatever it is applied to. But over time interest is added on interest. This is called compound interest (when interest is added to interest). The power of compound interest on a specific financial tool increases as time progresses. This gives way to exponential growth possibilities wherever compound interest has enough time to work its magic.
An investment of R1000 with an APR of \(5 \%\) increases with R50 of interest in the first year. The following year it's worth R1050 and increases with R52.50 (on an APR of 5\%). But let this run for 60 years and you'll see the exceptional power of compound interest. At the beginning of the 60th year, the investment is worth R17'789.70 and with the same 5\% APR, it increases with R889.49. In year one the investment increased with R50 but in year 60 it increased with R889.49 even though the APR remained the same because compound interest had time to accumulate more momentum.
by Diamond (58,497 points)

Related questions

0 like 0 dislike
1 answer
asked Jan 11 in Economics and Finance by Gauss Diamond (58,497 points) | 107 views
1 like 0 dislike
1 answer
asked Sep 6, 2021 in Mathematics by Siyavula Bronze Status (8,110 points) | 167 views
0 like 0 dislike
0 answers

Join the MathsGee Learning Club where you get study and financial support for success from our community. CONNECT - LEARN - FUNDRAISE


On the MathsGee Learning Club, you can:


1. Ask questions


2. Answer questions


3. Vote on Questions and Answers


4. Start a Fundraiser


5. Tip your favourite community member(s)


6. Create Live Video Tutorials (Paid/Free)


7. Join Live Video Tutorials (Paid/Free)


8. Earn points for participating



Posting on the MathsGee Learning Club


1. Remember the human


2. Behave like you would in real life


3. Look for the original source of content


4. Search for duplicates before posting


5. Read the community's rules




CLUB RULES


1. Answers to questions will be posted immediately after moderation


2. Questions will be queued for posting immediately after moderation


3. Depending on how many posts we receive, you could be waiting up to 24 hours for your post to appear. But, please be patient as posts will appear after they pass our moderation.


MathsGee Android Q&A