Compounding is the process by which interest earned on an investment is reinvested so that in future periods, interest is earned on the interest previously earned as well as the original principal.

Question

Quizplus · Accepted Answer

Compounding involves reinvesting the interest earned back into the investment, leading to the growth of both the principal amount and the interest earned. This process results in earning interest on the interest previously earned, which is known as compound interest.

Compounding Is the Process by Which Interest Earned on an Investment