Which of the following refers to the ability of an asset to generate returns, which are then reinvested in order to generate their own returns?
A) buy and hold
B) compounding
C) simple returns
D) extrapolation

Question

Quizplus · Accepted Answer

Compounding refers to the ability of an asset to generate returns, which are then reinvested in order to generate their own returns. Choice A (buy and hold) refers to a long-term investment strategy where an investor buys securities and holds onto them for an extended period of time, while choice C (simple returns) refers to the actual returns earned on an investment, without taking into account the effects of compounding. Choice D (extrapolation) refers to the use of past data to make predictions about future trends.

Which of the Following Refers to the Ability of an Asset