what is the relationship between compound interest and exponential growth? in your own words please so i understand
? :))

Question

what is the relationship between compound interest and exponential growth? in your own words please so i understand
? :))

jonathanvaldes98 · Answer

Compound growth, exponential growth are words used to describe ways in which the value of an investment will grow

jonathanvaldes98 · Answer

dous that explain it enough

zepdrix · Answer

This is probably more in regards to the question you asked last night, but maybe it will help.


Let's say you have $\Large $20$. And let's say you invest it at a rate of 25%.
With simple interest, the interest that you're gaining is always calculated off of the base amount.

So the next time the interest is calculated, you will have $\Large $25$.
The time after that will be $\Large $30$.

See how it keeps increasing by 25% of the base amount?
(25% of 20 is 5).


With compound interest we don't calculate interest based off of the base, but off of the new total.

So using our last example:
We start with $\Large $20$ and after our first pay period we gain some interest putting us at $\Large $25$. Our next pay period after that, the interest generated will be 25% of our new amount, $\Large $25$.

25% of $25 is $\Large $31.25$.

zepdrix · Answer

So we need to relate this to exponential growth? Hmm

anonymous · Answer

that expains it better! thank you everyone!