Understanding Compound Interest

What is the primary benefit of compound interest compared to simple interest?

• It provides a fixed return on investment.

• It guarantees a higher interest rate.

• It allows for exponential growth by earning interest on interest.

• It requires less initial investment.

In the compound interest formula, what does the variable 'n' represent?

• The number of times interest is applied per period

• The interest rate

• The initial principal balance

• The total time in years

How much would a $10,000 investment grow to after 30 years with a 3% annual compound interest rate?

• $30,000

• $24,272

• $15,000

• $19,000

What is the difference in final amount between compound and simple interest on a $10,000 investment over 30 years at a 3% rate?

• $5,272

• $10,000

• $4,000

• $9,000

How much would you need to invest with compound interest to become a millionaire in 30 years?

• $231,500

• $750,000

• $500,000

• $100,000