REAL ESTATE FINANCE W/ACCESS
REAL ESTATE FINANCE W/ACCESS
16th Edition
ISBN: 9781266527746
Author: BRUEGGEMAN
Publisher: MCG
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Chapter 3, Problem 1Q
Summary Introduction

To explain: The important concept which helps in understanding the compounding interest.

Expert Solution & Answer
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Explanation of Solution

“Earning further interest on reinvested interest earnings” is the important concept which helps in understanding the compounding interest. If the accumulated interest or the amount which is earned on a particular principle value is reinvested rather than the paid off, then in the next year they are able to earn interest on both the amounts that is principal amount and the interest which is reinvested. Therefore, this process is known as the compounding.

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