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Compound Interest

compound interest

You can build your financial wealth once you acquire the knowledge of how money grows overtime, or the time value of money and the compound interest concepts. When you invest money that earns a fixed interest rate over a long period of time, you can calculate when your money doubles using the rule of 72. Simply divide 72 by the annual rate of return, and you can get a rough estimate of how many years it will take for the initial investment to double. For example, the rule of 72 states that $1 invested at 10% would take 7.2 years ([72/10] = 7.2) to turn into $2.

The information about compound interest has been drafted from Penn State's Financial Literacy and Wellness Center.