Question

prepare a 4-page paper on how the concept of compounding can bring wealth and how has technology changed investing. please include references

Answer 1

The concept of Compounding is to earn interest on opening balance of loan i.e. closing balance of previous period. The closing balance of loan for each period is calculated considered based closing balance of previous period and addition of interest charged for each period. The example for a compound interest for a year considering 1% interest for a month on compounding basis is provided as below :

Month	Opening balance of loan (USD mn)	Interest (1% per month)	Closing Balance of loan (USD mn)
Jan	100	1	101
Feb	101	1.01	102.01
Mar	102.01	1.0201	103.0301
Apr	103.0301	1.030301	104.060401
May	104.060401	1.04060401	105.101005
Jun	105.101005	1.05101005	106.1520151
Jul	106.1520151	1.061520151	107.2135352
Aug	107.2135352	1.072135352	108.2856706
Sep	108.2856706	1.082856706	109.3685273
Oct	109.3685273	1.093685273	110.4622125
Nov	110.4622125	1.104622125	111.5668347
Dec	111.5668347	1.115668347	112.682503

Based on the example as above, due to power of compounding of interest @ 1% per month for 12 months, the interest earned for 12 months is more than 12.68% per annum. The interest earned over a period of time increases exponentially by compounding interest. The Power of Compounding works magically and it can go beyond imagination over a period of time and creates wealth.

It is also important to start investing early without loosing interest. The small investment needs to be invested early to start earning interest. The tool of interest compounding skyrockets the earnings and savings. The earlier you start invsting, the greater would be the Power of Compounding.

The Excel and various softwares used in Banks and Financial Institutions calculates interest based on compounding basis.

The technology has investing in Shares and securities, Exchange Traded Funds (ETFs), Mutual Funds and bank deposits. With the use of internet and applications on Smart mobile phones, investment can be made instantly without lose of time and money. Additionally, internet helps in research of investment and adds value in decision making for investment substantially.

The reference can be provided for stock exchanges providing online services and mobile applications for investments, bank fixed deposits can be created with surplus funds in saving or current account through internet or mobile applications instantly or Mutual funds investments through internet or mobile applications.