Interest in a nut shell is the cost of buying and selling money. The Banks buy money from you when you deposit money in the savings accounts or Certificate of Deposits at the Banks. The Banks give you a rate of interest on those accounts. But what do banks get out of that They then sell the money through loans and credit cards. So let us suppose the Banks give you 3% interest rate on the savings account and get 8% interest rate on a loan they give out. Essentially they make a profit of 5 % on that money. Now what is compounding of interest Simply put when interest is being paid on some money, that interest is added to the money and then the interest clock starts ticking on the new amount. Though it does not particularly sound exciting it is a very powerful concept and if utilized well can financially benefit anyone who understands it. To understand this concept an old parlor trick question can help. That question is, what would you prefer $1000 everyday for a month or a penny doubled everyday for the month (i.e. 1 cent the first day 2 cents the second day 4 cents the third day etc.). The mathematically astute person knows that this is a no contest and the person taking the penny doubling offer wins by a huge margin. The compound interest can be explained like this .Simple interest as we already know is the interest that is derived from only the investment in a principal amount. Say we take $100 and put it in an investment for one year at a simple interest rate of 10%. We multiply the interest rate of 10% times the principal amount of $100 to derive an interest payment of $10. This seems fairly obvious and straightforward. But let's look at what happens in the second year if the interest is not paid out. In a "compound" investment, the interest is not paid out to the holder; it is built up within the investment. Consider our $100 above. If the interest was paid out after the first year, we would get our $10 in interest and have our original $100 still invested. If the interest is not paid out, however, we would have our original principal of $100 plus $10 in interest for a total of $110 at the end of the first year. This entire amount would bear the original interest rate of 10% for the second year. Not only would we get 10% or $10.00 in interest on the original principal of $100, we would also get $1 which is 10% on the $10.00 interest from the first year. Our total interest received would be $11. This would continue into the third year. At the end of the second year, since we have not paid out any interest, we would start with our $110 from the end of the first year plus the $11 we earned in the second year. This would give us a third year opening balance of $121 which would bear interest of 10% for the third year. Our 10% interest on $121 equals $12.10. Assuming we still don't pay out any interest, we will now have a total investment of $133.10. Well it still does not look too exciting. But let us extrapolate this further. If we leave this $100 alone for about 30 years we will end up with a $ 1000. Now that is interesting but definitely not exciting. Well how about this using the same mathematics if you save a $100 a week in thirty years that is One Million dollars. Now that without any doubt is exciting. But this sounds too good to be true, so the skeptic in me says that most likely in 30 years Million dollars would be
The main purpose of this report is to look into the power of compound interest and how one can maximize ones saving capacity without making drastic lifestyle alterations. It looks into whether becoming a millionaire is difficult and whether becoming one is limited to successful businessmen and lottery winners…
Beneficiary Interest Vs. Trustee Power. A trust is a concept whereby property, the subject matter of the trust, is transferred from one person the settlor to another, the trustee to hold for a specified list or class of persons, the beneficiaries. It is a formal transfer device analogous to a will except property transfer is to trustees not executors.
Thus, in descending order, the boiling points are: 1-Hexanol> 1-Pentanol > 3-Methyl-1-Butanol > 3-Methyl-2-Butanone Boiling points are temperatures at which the vapour pressure of the liquid, equals that of the gas pressure above it (Hill & John, 2011: p32).
It also describes how to differentiate an element and a compound despite being pure substances by results from decomposition. In the paper the metals, non-metals, and transitional elements are discussed to demonstrate the bonds. Ionic bonding formed between metals and non metals are explained and illustrated.
A compound on the other hand, is a pure substance made of two or more chemically combined elements. Compounds are separable by chemical means such as electrolysis, oxidation and reduction (Phillips, 1998). A mixture and a compound also vary on the composition of the component elements.
In captivity, as well as in the wild, tigers live for approximately 25 years. As highly solitary yet social animals, tigers typically require massive land spaces so as to support their prey needs. This fact, coupled with the assertion that tigers are indigenous to quite densely populated areas of the world, has resulted in major conflict between humans and tigers.
The company management has to make a balanced assessment and evaluate all such external forces in order to adjust them with company's objectives. While taking crucial corporate decisions, it is necessary to know about the expectations of different stakeholders and to determine the extent to which they could and would exert their influence.
Drinking water shortage is a big problem not only in America but all over the world. Heavy industrialization, dumping of wastes and excessive usage of fertilizers and chemicals in agricultural fields converted many of the fresh water resources
Investment simply means an asset or item purchased with the hope of income generation or value appreciation within some time. Investment has two sides that can give angles of definition. In economics, investment is defined as the purchase of
The author states that interest is an amount paid for utilization of borrowed money. A borrower pays interest to the lender for credit or any other comparable liability. In other words, interest happens to be charge for a privilege of borrowing cash. Borrowing is important in everyday life since it is a source of funding.
4 pages (1000 words)Essay
Get a custom paper written by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Apply my DISCOUNT
Got a tricky question? Receive an answer from students like you!Try us!
Didn't find an essay?
Contact us via Live Chat, call us at +16312120006or send an email to firstname.lastname@example.org