Editing 947: Investing
Warning: You are not logged in. Your IP address will be publicly visible if you make any edits. If you log in or create an account, your edits will be attributed to your username, along with other benefits.
The edit can be undone.
Please check the comparison below to verify that this is what you want to do, and then save the changes below to finish undoing the edit.
| Latest revision | Your text | ||
| Line 8: | Line 8: | ||
==Explanation== | ==Explanation== | ||
| β | {{w|Compound interest}} is a type of {{w|interest}} in which the interest earned is added to the total amount, so that the interest itself then begins to gain interest in an exponential fashion. This contrasts to {{w|simple interest}}, where the amount used to calculate the interest will always stay at a fixed value. In economics classes, many teachers like to demonstrate extreme examples of compound interest, typically turning a thousand dollars into tens of thousands thanks to unrealistically high interest rates over several decades. But here, Ponytail discovers that a more realistic example is less than overwhelming. Instead of simple interest | + | {{w|Compound interest}} is a type of {{w|interest}} in which the interest earned is added to the total amount, so that the interest itself then begins to gain interest in an exponential fashion. This contrasts to {{w|simple interest}}, where the amount used to calculate the interest will always stay at a fixed value. In economics classes, many teachers like to demonstrate extreme examples of compound interest, typically turning a thousand dollars into tens of thousands thanks to unrealistically high interest rates over several decades. But here, Ponytail discovers that a more realistic example is less than overwhelming. Instead of simple interest earning $200 in ten years, with compounding $219 is produced, hardly any better on a $1000 investment. |
There is an urban legend that Einstein said that compounding interest is the most powerful force. {{w|Snopes}} has its [http://www.snopes.com/quotes/einstein/interest.asp doubts about it]. | There is an urban legend that Einstein said that compounding interest is the most powerful force. {{w|Snopes}} has its [http://www.snopes.com/quotes/einstein/interest.asp doubts about it]. | ||
