Compound Interest Basics. Rule of 72.
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Compound Interest accrues on the initial principal and the accumulated interest of a principal deposit, loan or debt. Compounding of interest allows a principal amount to grow at a faster rate than simple interest, which is calculated as a percentage of only the principal amount. This tutorial gives an introduction to this fundamental concept.
This video will explain the Rule of 72. The rule of 72 is commonly used for a mental calculation of an investment's doubling time. It applies to exponential growth and is therefore used for compound interest as opposed to simple interest calculations. It can also be used for decay to obtain a halving time.
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