What is compound interest and which financial products are compounded?

"Compound interest" is "rolling interest", that is, within a certain period of time, the interest is included in the principal, and then on the basis of this total, the interest is calculated.

In fact, the interest on bank deposits is now simple interest, which is actually designed according to the idea of compound interest. Of course, there are many financial products that will be compounded, such as: investments, long-term bonds, some insurance products, some financial derivatives, etc., which will appear compounded.

In layman's terms, compound interest means that both principal and interest can be interest-bearing. is relative to simple interest.

For example, if you deposit 100 yuan in a bank with an annual interest rate of 3%, you intend to save it for 3 years.

In the case of simple interest, your capital plus interest after 3 years = 100 * (1 + 3% * 3) = 109 (yuan).

In the case of compound interest, your capital plus interest after 3 years = 100 (1 + 3%) * 1 + 3% * 1 + 3%) =

Generally speaking, the interest accrual of bank deposits is compounded.

Compound interest is generally the way to calculate interest on financial products with a maturity of more than 1 year, and now it is basically compound interest.

<> "Compound Interest. compound interest-

The eighth wonder of the world.

What is compound interest

Compound interest is a method of calculating interest, that is, in addition to the interest calculated according to the principal, the newly obtained interest can also earn interest, commonly known as interest rolling, donkey rolling.

The formula for compound interest: return = principal * (1 interest rate) n

With the growth of time n, the effect of compound interest will be obvious, especially if it is extended to more than 30 years, the gap between compound interest and simple interest will be incredible, this is the power of compound interest.

Compound interest on investments

In investment, compound interest means that the money earned each time is not withdrawn, but reinvested to make money. For example, investing in shops, real estate, bonds, and even ** are all part of using money to make money.

Warren Buffett famously said, "Life is like a snowball, the important thing is to find very wet snow and very long slopes." "Very wet snow = high yield, very long slope = very long.

The combination of very wet snow and a long slope can make a huge snowball. He used the snowball metaphor to realize great wealth under the long-term effect of compound interest.

In reality, almost no one can accelerate the growth of compound interest through short-term violence, and we should continue to improve our cognition, maintain stable and sustained income, make long-term investments, and be friends of time to feel the power of compound interest.

In addition to financial investment, in life, we should all develop a compound interest mindset to improve all aspects of our personal growth.

Today, you only need to act further than yesterday, and the gap between you after 365 days and ordinary people who have stopped moving forward is doubled! !r

From memorizing 10 single cong aphorisms every day, exercising for 20 minutes, reading for 30 minutes, and learning 1 financial knowledge. Start, go on like this, and make excellence a habit!

Continuous compound interest: Continuous compound interest means that the interest is paid continuously, and the frequency of interest payments is more frequent than 1 time per second, which is expressed by the formula.

f=p*e^rt

Compound annual interest: f=p*(1+r) t

f is the final value, p is the present value, e is the natural logarithm, r is the continuous compound rate, and t is the number of periods (years).

The simplest way to say compound interest is "rolling interest".

For example: if you borrow 1,000 yuan from someone else, the annual interest rate is 10%, and the borrowing period is 5 years, then if it is not compound interest, the money you have to return after 5 years is:

1000 + 1000 x 10% x 5 = 1500 yuan.

If it's compound interest, the amount you have to pay back after 5 years is:

1000x [(1+10%) to the power of 5] = yuan.

You can calculate what happens if you borrow for 10 years according to this algorithm? Then you will find that the longer the time, the more obvious the effect of compound interest will be.

Extended information: The calculation of compound interest is calculated together with the principal and the interest accrued, that is, the interest is favorable.

The present value of compound interest refers to the principal amount that must be invested in order to reach a specific amount of money in the future. The so-called compound interest, also known as interest on top of interest, refers to the method of making a new round of investment with interest after a deposit or investment has been returned.

The final value of compound interest refers to the sum of the principal at the end of the agreed period after the interest is obtained within the agreed period, the interest is added to the principal and the interest is recalculated, and the sum of the principal at the end of the agreed period is rolled over to the agreed period. To put it simply, it is to deposit A at the beginning of the period, with i as the interest rate, and the sum of the principal and interest after depositing n periods. Formula:

f=a*(1+i)^n。

For example, if the principal amount is 50,000 yuan, the interest rate or return on investment is 3%, and the investment period is 30 years, then the interest income obtained after 30 years will be calculated according to the compound interest calculation formula, and the sum of principal and interest (final value) is: 50,000 (1+3%) 30

Since inflation rates and interest rates are closely related, like two sides of the same coin, the formula for calculating the terminal value of compound interest can also be used to calculate the actual value of a particular fund in different years. Just swap the interest rate in the formula for the inflation rate.

The word "compound interest" is what I saw from an article, it is indeed very quick and practical, and it refers to the doubling effect by simply insisting on doing one thing. And the thinking of "compound interest" actually exists in all aspects of life. Compound interest seems simple, do you know what compound interest is?

A real example, the takeaway brother Lei Hai won the championship of the poetry conference in one fell swoop in order to defeat the master of Peking University, many people think that he must have put in extraordinary efforts, but the fact is that he only takes a fixed hour of reading time every day, and this hour is pieced together by fragmented time during the delivery period!

Another example is that everyone thinks that a 0How tall will a paper of 04m be folded in half 64 times? 10 meters?

20 meters? Far from enough, a piece of paper folded in half 64 times is 166020696 million kilometers, and the moon to the earth is only 3840,000 km.

These examples are indeed a bit unimaginable, but the "compounding" effect of these small things that you might think is trivial or scoffable is staggering.

In fact, if you look closely, you can see that many people use this thinking to do things. Wu Xin, who has recently become a hot search because of his transformation into a leg essence, has actually just made a little more effort than others every day, supporting the wall and pulling legs, soaking feet and pedaling bicycles. Warren Buffett, who is famous for his wealth, is not a person who became rich overnight, before that, he relied on the accumulation of wealth day after day to achieve today's achievements, and the growth rate of each year is only 5

3%, that is, you have 10,000 yuan, and it only rises by 530 yuan every year.

That doesn't sound like an opportunity to get rich. All in all, the "compound interest" mindset may seem simple, but few people are willing to try it. Because most people want to be able to soar into the sky and become rich overnight, this process first requires you to adjust your mentality, not to be too scumbag, to look forward to the immediate results, and insist on doing it every day, making a little progress every day, and believing that time will give you the best return.

Do you understand the meaning of compound interest?

Compound interest means that when calculating the recalcitrant interest, the principal and the interest of the previous cycle will be calculated as the principal of this cycle. For example, if you borrow 10,000 yuan with an annual interest rate of 10%, the interest rate for the second year is calculated according to the principal of 10,000.

Compound interest means that when a calculation period is reached, the interest generated by all the principal is added to the principal again, and then the interest obtained is compound interest.

It is a way to calculate interest, often used for loans or other commercial purposes, and has a great role in finance, and has a great relationship with the quiet people who are engaged in the financial industry.