Fin concept

Hello! Interest Interest is an essential element of every financial system and if we talk about interest what comes in mind is Compounding interest and Simple interest. Compounding interest offer interest on re-invested amount of interest. Compounding interest assume the re-invest the outstanding interest amount at the same rate. Theorem: "Effect of compounding over simple interest is much higher in long run because of exponential effect of time and rate difference" Power of compounding: What is Power of compounding? Power of Compounding means study of exponential growth of interest. There are two factor affect the exponential growth of interest 1. Time phase 2. Interest rate Time phase: Initially time has minor exponential effect on growth rate of interest element. But with passage of time interest compounding actually higher than simple interest as amount of interest portion in total outstanding amount increases at increasing rate. Lets understand wit...