compound是什么意思，compound翻译

compound是什么意思，compound翻译

Compound

In the realm of finance, the term "compound" is often thrown around. But what does it really mean? In simple terms, compound refers to the process of earning interest on both the initial principal and the accumulated interest from previous periods. This concept is crucial in understanding how investments and savings grow over time.

To better grasp the concept of compound, let's consider an example. Imagine you have $1,000 that you deposit into a savings account with an annual interest rate of 5%. At the end of the first year, you will earn $50 in interest, bringing your total balance to $1,050. In the second year, you will earn interest not only on your initial $1,000 but also on the $50 of interest you earned in the first year. This is because the interest is compounded annually. So, in the second year, you will earn $52.50 in interest, and your total balance will be $1,102.50.

The power of compound interest becomes more evident over longer periods. As the number of years increases, the accumulated interest grows at an accelerated rate. This is due to the fact that each year, the interest is calculated not only on the initial principal but also on the interest that has been added to it in previous years. This exponential growth can be illustrated with the Rule of 72, which states that an investment will double in value in approximately 72 divided by the annual interest rate years.

There are different types of compound interest, depending on how frequently it is calculated. For example, simple interest is calculated only on the initial principal and is paid only once at the end of the term. Compound interest, on the other hand, is calculated on the initial principal and any previously earned interest, and it is paid out at regular intervals, such as annually, semi