Compounding:
A) is beneficial to savers, but costly to borrowers.
B) is beneficial to borrowers, but costly to savers.
C) is beneficial to borrowers and savers alike.
D) is costly to both borrowers and savers.

Question

Quizplus · Accepted Answer

Compounding is beneficial to savers because it allows their investments to grow over time as interest is earned on both the initial principal and the accumulated interest. However, it is costly to borrowers because the interest on their loans compounds, increasing the total amount they owe over time.