Question

If the interest is calculated on the principal
alone,then it is known as
​

Answer 1

Answer:

There are two ways, depending on how you allocate capital. I describe below the two formulas, but I find that the wonder of compound interest is .

One-off capital allocation

In this formula, we only take into account a lump-sum amount being invested.

Here is the formula:

And the variables explained:

Initial Investment - this is the lump-sum amount you want to invest initially;

Interest Rate - what is the expected return of the asset you will invest in;

Compound Frequency - how many times, per year, do you receive interest? Some products provide a monthly interest, others every 6 months, and others only once a year;

Years Invested - how many years do you expect to remain invested?

The longer you remain invested, the higher the compound interest.