An example of compounding is
A)buying stocks that do not pay dividends.
B)buying a strip bond.
C)using dividends to pay your cell phone bill.
D)reinvesting dividends to purchase more units.

Question

Quizplus · Accepted Answer

Reinvesting dividends to purchase more units is an example of compounding because the dividends are being reinvested to purchase more units, which will in turn generate more dividends. This creates a compounding effect on the investment.

An Example of Compounding Is