If the interest for one year is Rs100 then for two years, it’s Rs 200. This extra profit earned by the moneylender is called interest. This means moneylender needs Rs 100 extra as profit each year for lending money. Moneylender asks for a profit of 10% each year which needs to be added with the amount at the end of two years. For example, a person borrows Rs 1000 from a money lender and promises to return the amount in two years. It is always calculated on the particular rate of interest for a particular period of time. Interest or simple interest is the profit earned on lending a sum of money. So, let’s delve deeper into the chapter to find out how money exponentially grows every year on the application of compound interest. The compound interest is the interest earned on the principal (original amount) as well as on the interest already earned. In fact, earning compound interest is a great thing because it is not just simple interest you get on a certain amount of money. Compound interest is like multiplication of the money that you keep in your bank account. Wouldn’t it be an amazing treat to gobble down what you love? Similarly, compound interest is a treat for people who work day and night scrupulously to earn money in order to achieve their dreams and ambitions. Imagine how beautiful it would be if ice-cream can keep multiplying like you can keep a bowl of ice-cream in the fridge to wake up next morning and find an extra bowl of ice-cream.
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