The basics of Compound Interest
A dollar invested at a 10% return will be worth $1.10 in a year. Invest that $1.10 and get 10% again, and you'll end up with $1.21 two years from your original investment. The first year earned you only $0.10, but the second generated $0.11. This is compounding at its most basic level: gains begetting more gains. Increase the amounts and the time involved, and the benefits of compounding become much more pronounced.
Compound interest can be calculated using the following formula: FV = PV (1 + i)^N
FV = Future Value (the amount you will have in the future)
PV = Present Value (the amount you have today)
i = Interest (your rate of return or interest rate earned)
N = Number of Years (the length of time you invest)
-from stocks class on morningstars website
Compound interest can be calculated using the following formula: FV = PV (1 + i)^N
FV = Future Value (the amount you will have in the future)
PV = Present Value (the amount you have today)
i = Interest (your rate of return or interest rate earned)
N = Number of Years (the length of time you invest)
-from stocks class on morningstars website
posted by The Hopenistic Man at 10:27 AM
2 Comments:
Wow. I had no idea you had so many posts on this thing! I guess I'll have to bookmark it along with Steven's.
I remember those compounding interest problems from high school that followed that formula, except sometimes the exponent would do something weird...maybe that's if interest is accrued monthly, or quarterly, or whatnot. Hi Rick! :D
P.S. I clicked on your ad a few times for you.
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