The calculation of compound interest assumes reinvestment of interest payments at the given rate of return.

Name: The calculation of compound interest assumes reinvestment of interest payments at the given rate of return.
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Compound interest involves reinvesting the interest earned. This leads to greater returns over time because the interest earned in each period is added to the principal, and in the subsequent period, interest is earned on the principal plus the interest earned in the previous period.

The Calculation of Compound Interest Assumes Reinvestment of Interest Payments