Question

How can investors receive compounding returns?
A) By investing their earnings back into their original investment
B) By diversifying their investment portfolio
C) By selecting a savings account that has a higher interest rate
D) By transferring their earnings back into high-risk investment

Answer 1

Compounding is the process of generating more return on an asset's reinvested earnings.This can only be achieved through the reinvestment of earnings and time which help  initial investment grow exponentially .

To achieve  compounding returns one need to choose an investment method that earns compound interest, rather than simple interest. If you’re weighing an account that offers higher interest rates with simple interest against an account that offers lower rates with compound interest one should opt for  long-term going with the compound option.

To take  compounding returns to the next level one need to build an investment fund that earns even higher interest. The cumulative interest rate over an extended period of time is known as its compound return.

Answer 2

‘By investing their earnings back into their original investment’ the investors can receive compounding returns.

Option: A

Explanation:

• The Compound returns take place is when the value of money that has been investment grows based not only on the original principal but it is also affected by the also returns that investment generated.  

• The method of compound returns is effectively one of the most effective forms of investment and also an expensive form of debt in regards to finance.  

• It is best suited for long term investments in the market or business.  

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