How does the frequency of compounding interest impact the growth of savings?
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How does the frequency of compounding interest impact the growth of savings?
by Beyonder Fri Apr 29, 2016 1:15 pm
How does the frequency of compounding interest impact the growth of savings? Is when You are investing in the savings instruments, you can earn the interest at a contractual interest rate. The interest rate is usually stated as a yearly rate.
Example: If someone invests in a $1,000 in a certificate of deposit (CD) that pays an annual interest rate of 6%, a year later you will have $1,060. The $60 in interest you earn in a year is your compensation for deferring consumption today. If you decide to invest the $1,060 for another year at 6%.
Example: If someone invests in a $1,000 in a certificate of deposit (CD) that pays an annual interest rate of 6%, a year later you will have $1,060. The $60 in interest you earn in a year is your compensation for deferring consumption today. If you decide to invest the $1,060 for another year at 6%.
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