Interest charges accrue on top of existing debt and saving leads to substantial growth savings over the long run. This is known as the:
A) vesting effect.
B) teaser effect.
C) interest rate effect.
D) compounding effect.

Question

Quizplus · Accepted Answer

The compounding effect refers to the process where interest is earned on both the initial principal and the accumulated interest from previous periods, leading to exponential growth over time.

Interest Charges Accrue on Top of Existing Debt and Saving