Compounding refers to the
A) calculation of after tax interest returns.
B) internal rate of return a firm earns on an investment.
C) real interest return after taxes.
D) process of earning interest on both the principal and the interest of an investment.

Question

Quizplus · Accepted Answer

Compounding refers to the process of earning interest on both the principal and the interest of an investment. This means that the interest earned during each period is added to the principal, and then interest is earned on the new, higher amount in the next period. This allows for exponential growth in the value of the investment over time.

Compounding Refers to the