Question

Explain the concept of compounded interest, and how this compounding may benefit one’s retirement savings. For example, (not that any of us will receive a 100% interest compound on a daily basis), but imagine you began with a single penny. If you were able to compound and double your investment each day, how much would you have accumulated in a mere 30-day period? The answer is amazing … at $5,368,709.12.

Answer 1

0	$0.00
1	$0.01
2	$0.03
3	$0.07
4	$0.15
5	$0.31
6	$0.63
7	$1.27
8	$2.55
9	$5.11
10	$10.23
11	$20.47
12	$40.95
13	$81.91
14	$163.83
15	$327.67
16	$655.35
17	$1,310.71
18	$2,621.43
19	$5,242.87
20	$10,485.75
21	$20,971.51
22	$41,943.03
23	$83,886.07
24	$167,772.15
25	$335,544.31
26	$671,088.63
27	$1,342,177.27
28	$2,684,354.55
29	$5,368,709.11

Compounding interest is a process in which when an investment is made the interest is is calculated on the amount on the first iteration and after that in the second iteration and interest is calculated on both the previous principal and the accumulated interest. In this way it rotates and gives interest on both the principal and the interest that is accumulated on the previous period.
So in this way amount gets doubled everyday if the interest rate is 100% and the interest on a particular day on the period is calculated on the already accumulated interest and principal.
This helps in planning retirement because after retirement a person need to have some money for living on a regular interval and this can be done by investing small amount from the the beginning of his employed life so that during retirement he can take the benefit of the the investment that he has made during his employed age.

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