Compound Interest - Friend or Foe?

COMPOUND INTEREST Friend or Foe? Sources: wikipedia.org, marketwatch.com, investopedia Compound interest was once regarded as "Compound interest is the eighth wonder of the world. He who understands it, the worst kind of usury, and was severely condemned by Roman law, as well as the earns it .he who doesn't . pays i" common laws of many other countries, Albern Einstein "O ye who believe! Devour not usury, doubling and quadrupling (the sum lent). Observe your duty to Allah, that ye may be successful." The Qur'an explicitly mentions compound interest as a great sin. Usury (oppressive interest), known in Arabic as "riba", is considered wrong: Qurans30 The Bible addresses the charging of interest in the following manner: " Take no usury or interest from him; but fear your God, that your brother may live with you. You shall not lend him your money for usury, nor lend him your food at a profit." Leviticus 25:36-37 HOLY BIBLE DEFINITION Interest computed on the accumulated unpaid interest as well as on the original principal. When Compound Interest Loan: $1,000 $1,100 $1,210 $1,331 Interest: x10% x10% x10% etc. is your $100 $110 $121' FOE Py x (1+r)^\= FV. *p- Present Value Interest Rate (as a decimal) Number of Periods Future Value With Compound Intereșt, you work out the interest for the first period, add it to the total, and then calculate the interest for the next period, and so on .., like this: The FORMULA Here are the calculations for a 5 Year Loan at 10% Loan at End $1,100.00 $1,210.00 $1,331.00 $1,464.10 $1,610.51 $1,771,56 Interest (x 10%) $100.00 $110.00 $121.00 $133.10 $146.41 $161.05 Loan Start at $1,000.00 S$1,100.00 $1,210.00 $1,331.00 $1,464.10 $1,610.51 YEAR 2 3 4 (now) When Compound Interest is your FRIEND FRIEND Let's say you have three friends; Charlie, Kim, and Sally. Each one has money to invest. Charlie has $30,006. Kim and Sally each have $10,000 to invest. Charlie places his money into a 30-year investment whịch pays 12% simple interest annually. Kim and Sally also put their money into 30-year investmenț vehicles at 12% annual interest. However, theirs' is compound interest, with Kim's compounding yearly and Sally's investment compounding quarterly. Friends 12% interest after 30 years $30,000 | 30-YEAR INVESTMENT annually $138,000- CHARLIE 30 -YEAR INVESTMENT $10,000 VEHICLES $299,599.22 annually KIM 30-YEAR INVESTMENT VEHICLES $347,109.87 quarterly $10,000 SALLY After 30 years, here's what their accounts would look like: The total value of Charlie's investment has grown to $138,000 (principal and interest). The total value of Kim's investment is $299,599.22. The total value of Sally's account has become $347,109.87. Moreover, if Sally made $50 additional deposits every two weeks during the 30-year period, her balance would increase to $755,859.58! As you can readily see, even though Charlie had three times as much money to invest initially, the compounding investments of Kim and Sally greatly outperformed his investment in the long run. But let's hit a little closer to home. $755,859.58 +50 +50 +50 $100 30h years Most of us don't have a large sum to sink into an investment for thirty years. What would it be like if Sally only had $100 to invest, but she could continue to deposit an additional $100 into the account every month over the full thirty years? At a more real-worldly compounded rate of 8%, let's see how she'd fare: ら After 30 years, Sally's account would be worth $150,129.52, which still outperforms Charlie's investment! • If she deposited $25 weekly instead of $100 monthly (only $50 more per year), her balance after 30 years would be $165,634.94! COMPOUND INTEREST COMPOUND INTEREST Friend or Foe? Sources: wikipedia.org, marketwatch.com, investopedia Compound interest was once regarded as "Compound interest is the eighth wonder of the world. He who understands it, the worst kind of usury, and was severely condemned by Roman law, as well as the earns it .he who doesn't . pays i" common laws of many other countries, Albern Einstein "O ye who believe! Devour not usury, doubling and quadrupling (the sum lent). Observe your duty to Allah, that ye may be successful." The Qur'an explicitly mentions compound interest as a great sin. Usury (oppressive interest), known in Arabic as "riba", is considered wrong: Qurans30 The Bible addresses the charging of interest in the following manner: " Take no usury or interest from him; but fear your God, that your brother may live with you. You shall not lend him your money for usury, nor lend him your food at a profit." Leviticus 25:36-37 HOLY BIBLE DEFINITION Interest computed on the accumulated unpaid interest as well as on the original principal. When Compound Interest Loan: $1,000 $1,100 $1,210 $1,331 Interest: x10% x10% x10% etc. is your $100 $110 $121' FOE Py x (1+r)^\= FV. Present Value Interest Rate (as a decimal) Number of Periods Future Value With Compound Intereșt, you work out the interest for the first period, add it to the total, and then calculate the interest for the next period, and so on .., like this: The FORMULA Here are the calculations for a 5 Year Loan at 10% Loan at End $1,100.00 $1,210.00 $1,331.00 $1,464.10 $1,610.51 $1,771,56 Interest (x 10%) $100.00 $110.00 $121.00 $133.10 $146.41 $161.05 Loan Start at $1,000.00 S$1,100.00 $1,210.00 $1,331.00 $1,464.10 $1,610.51 YEAR 1 2 3 4 (now) When Compound Interest is your FRIEND FRIEND Let's say you have three friends; Charlie, Kim, and Sally. Each one has money to invest. Charlie has $30,006. Kim and Sally each have $10,000 to invest. Charlie places his money into a 30-year investment whịch pays 12% simple interest annually. Kim and Sally also put their money into 30-year investmenț vehicles at 12% annual interest. However, theirs' is compound interest, with Kim's compounding yearly and Sally's investment compounding quarterly. Friends 12% interest after 30 years $30,000 | 30-YEAR INVESTMENT annually $138,000- CHARLIE 30 -YEAR INVESTMENT $10,000 VEHICLES $299,599.22 annually KIM 30-YEAR INVESTMENT VEHICLES $347,109.87 quarterly $10,000 SALLY After 30 years, here's what their accounts would look like: The total value of Charlie's investment has grown to $138,000 (principal and interest). The total value of Kim's investment is $299,599.22. The total value of Sally's account has become $347,109.87. Moreover, if Sally made $50 additional deposits every two weeks during the 30-year period, her balance would increase to $755,859.58! As you can readily see, even though Charlie had three times as much money to invest initially, the compounding investments of Kim and Sally greatly outperformed his investment in the long run. But let's hit a little closer to home. $755,859.58 +50 +50 +50 $100 30h years Most of us don't have a large sum to sink into an investment for thirty years. What would it be like if Sally only had $100 to invest, but she could continue to deposit an additional $100 into the account every month over the full thirty years? At a more real-worldly compounded rate of 8%, let's see how she'd fare: After 30 years, Sally's account would be worth $150,129.52, which still outperforms Charlie's investment! • If she deposited $25 weekly instead of $100 monthly (only $50 more per year), her balance after 30 years would be $165,634.94! COMPOUND INTEREST COMPOUND INTEREST Friend or Foe? Sources: wikipedia.org, marketwatch.com, investopedia Compound interest was once regarded as "Compound interest is the eighth wonder of the world. He who understands it, the worst kind of usury, and was severely condemned by Roman law, as well as the earns it .he who doesn't . pays i" common laws of many other countries, Albern Einstein "O ye who believe! Devour not usury, doubling and quadrupling (the sum lent). Observe your duty to Allah, that ye may be successful." The Qur'an explicitly mentions compound interest as a great sin. Usury (oppressive interest), known in Arabic as "riba", is considered wrong: Qurans30 The Bible addresses the charging of interest in the following manner: " Take no usury or interest from him; but fear your God, that your brother may live with you. You shall not lend him your money for usury, nor lend him your food at a profit." Leviticus 25:36-37 HOLY BIBLE DEFINITION Interest computed on the accumulated unpaid interest as well as on the original principal. When Compound Interest Loan: $1,000 $1,100 $1,210 $1,331 Interest: x10% x10% x10% etc. is your $100 $110 $121' FOE Py x (1+r)^\= FV. Present Value Interest Rate (as a decimal) Number of Periods Future Value With Compound Intereșt, you work out the interest for the first period, add it to the total, and then calculate the interest for the next period, and so on .., like this: The FORMULA Here are the calculations for a 5 Year Loan at 10% Loan at End $1,100.00 $1,210.00 $1,331.00 $1,464.10 $1,610.51 $1,771,56 Interest (x 10%) $100.00 $110.00 $121.00 $133.10 $146.41 $161.05 Loan Start at $1,000.00 S$1,100.00 $1,210.00 $1,331.00 $1,464.10 $1,610.51 YEAR 1 2 3 4 (now) When Compound Interest is your FRIEND FRIEND Let's say you have three friends; Charlie, Kim, and Sally. Each one has money to invest. Charlie has $30,006. Kim and Sally each have $10,000 to invest. Charlie places his money into a 30-year investment whịch pays 12% simple interest annually. Kim and Sally also put their money into 30-year investmenț vehicles at 12% annual interest. However, theirs' is compound interest, with Kim's compounding yearly and Sally's investment compounding quarterly. Friends 12% interest after 30 years $30,000 | 30-YEAR INVESTMENT annually $138,000- CHARLIE 30 -YEAR INVESTMENT $10,000 VEHICLES $299,599.22 annually KIM 30-YEAR INVESTMENT VEHICLES $347,109.87 quarterly $10,000 SALLY After 30 years, here's what their accounts would look like: The total value of Charlie's investment has grown to $138,000 (principal and interest). The total value of Kim's investment is $299,599.22. The total value of Sally's account has become $347,109.87. Moreover, if Sally made $50 additional deposits every two weeks during the 30-year period, her balance would increase to $755,859.58! As you can readily see, even though Charlie had three times as much money to invest initially, the compounding investments of Kim and Sally greatly outperformed his investment in the long run. But let's hit a little closer to home. $755,859.58 +50 +50 +50 $100 30h years Most of us don't have a large sum to sink into an investment for thirty years. What would it be like if Sally only had $100 to invest, but she could continue to deposit an additional $100 into the account every month over the full thirty years? At a more real-worldly compounded rate of 8%, let's see how she'd fare: After 30 years, Sally's account would be worth $150,129.52, which still outperforms Charlie's investment! • If she deposited $25 weekly instead of $100 monthly (only $50 more per year), her balance after 30 years would be $165,634.94! COMPOUND INTEREST COMPOUND INTEREST Friend or Foe? Sources: wikipedia.org, marketwatch.com, investopedia Compound interest was once regarded as "Compound interest is the eighth wonder of the world. He who understands it, the worst kind of usury, and was severely condemned by Roman law, as well as the earns it .he who doesn't . pays i" common laws of many other countries, Albern Einstein "O ye who believe! Devour not usury, doubling and quadrupling (the sum lent). Observe your duty to Allah, that ye may be successful." The Qur'an explicitly mentions compound interest as a great sin. Usury (oppressive interest), known in Arabic as "riba", is considered wrong: Qurans30 The Bible addresses the charging of interest in the following manner: " Take no usury or interest from him; but fear your God, that your brother may live with you. You shall not lend him your money for usury, nor lend him your food at a profit." Leviticus 25:36-37 HOLY BIBLE DEFINITION Interest computed on the accumulated unpaid interest as well as on the original principal. When Compound Interest Loan: $1,000 $1,100 $1,210 $1,331 Interest: x10% x10% x10% etc. is your $100 $110 $121' FOE Py x (1+r)^\= FV. Present Value Interest Rate (as a decimal) Number of Periods Future Value With Compound Intereșt, you work out the interest for the first period, add it to the total, and then calculate the interest for the next period, and so on .., like this: The FORMULA Here are the calculations for a 5 Year Loan at 10% Loan at End $1,100.00 $1,210.00 $1,331.00 $1,464.10 $1,610.51 $1,771,56 Interest (x 10%) $100.00 $110.00 $121.00 $133.10 $146.41 $161.05 Loan Start at $1,000.00 S$1,100.00 $1,210.00 $1,331.00 $1,464.10 $1,610.51 YEAR 1 2 3 4 (now) When Compound Interest is your FRIEND FRIEND Let's say you have three friends; Charlie, Kim, and Sally. Each one has money to invest. Charlie has $30,006. Kim and Sally each have $10,000 to invest. Charlie places his money into a 30-year investment whịch pays 12% simple interest annually. Kim and Sally also put their money into 30-year investmenț vehicles at 12% annual interest. However, theirs' is compound interest, with Kim's compounding yearly and Sally's investment compounding quarterly. Friends 12% interest after 30 years $30,000 | 30-YEAR INVESTMENT annually $138,000- CHARLIE 30 -YEAR INVESTMENT $10,000 VEHICLES $299,599.22 annually KIM 30-YEAR INVESTMENT VEHICLES $347,109.87 quarterly $10,000 SALLY After 30 years, here's what their accounts would look like: The total value of Charlie's investment has grown to $138,000 (principal and interest). The total value of Kim's investment is $299,599.22. The total value of Sally's account has become $347,109.87. Moreover, if Sally made $50 additional deposits every two weeks during the 30-year period, her balance would increase to $755,859.58! As you can readily see, even though Charlie had three times as much money to invest initially, the compounding investments of Kim and Sally greatly outperformed his investment in the long run. But let's hit a little closer to home. $755,859.58 +50 +50 +50 $100 30h years Most of us don't have a large sum to sink into an investment for thirty years. What would it be like if Sally only had $100 to invest, but she could continue to deposit an additional $100 into the account every month over the full thirty years? At a more real-worldly compounded rate of 8%, let's see how she'd fare: After 30 years, Sally's account would be worth $150,129.52, which still outperforms Charlie's investment! • If she deposited $25 weekly instead of $100 monthly (only $50 more per year), her balance after 30 years would be $165,634.94! COMPOUND INTEREST COMPOUND INTEREST Friend or Foe? Sources: wikipedia.org, marketwatch.com, investopedia Compound interest was once regarded as "Compound interest is the eighth wonder of the world. He who understands it, the worst kind of usury, and was severely condemned by Roman law, as well as the earns it .he who doesn't . pays i" common laws of many other countries, Albern Einstein "O ye who believe! Devour not usury, doubling and quadrupling (the sum lent). Observe your duty to Allah, that ye may be successful." The Qur'an explicitly mentions compound interest as a great sin. Usury (oppressive interest), known in Arabic as "riba", is considered wrong: Qurans30 The Bible addresses the charging of interest in the following manner: " Take no usury or interest from him; but fear your God, that your brother may live with you. You shall not lend him your money for usury, nor lend him your food at a profit." Leviticus 25:36-37 HOLY BIBLE DEFINITION Interest computed on the accumulated unpaid interest as well as on the original principal. When Compound Interest Loan: $1,000 $1,100 $1,210 $1,331 Interest: x10% x10% x10% etc. is your $100 $110 $121' FOE Py x (1+r)^\= FV. Present Value Interest Rate (as a decimal) Number of Periods Future Value With Compound Intereșt, you work out the interest for the first period, add it to the total, and then calculate the interest for the next period, and so on .., like this: The FORMULA Here are the calculations for a 5 Year Loan at 10% Loan at End $1,100.00 $1,210.00 $1,331.00 $1,464.10 $1,610.51 $1,771,56 Interest (x 10%) $100.00 $110.00 $121.00 $133.10 $146.41 $161.05 Loan Start at $1,000.00 S$1,100.00 $1,210.00 $1,331.00 $1,464.10 $1,610.51 YEAR 1 2 3 4 (now) When Compound Interest is your FRIEND FRIEND Let's say you have three friends; Charlie, Kim, and Sally. Each one has money to invest. Charlie has $30,006. Kim and Sally each have $10,000 to invest. Charlie places his money into a 30-year investment whịch pays 12% simple interest annually. Kim and Sally also put their money into 30-year investmenț vehicles at 12% annual interest. However, theirs' is compound interest, with Kim's compounding yearly and Sally's investment compounding quarterly. Friends 12% interest after 30 years $30,000 | 30-YEAR INVESTMENT annually $138,000- CHARLIE 30 -YEAR INVESTMENT $10,000 VEHICLES $299,599.22 annually KIM 30-YEAR INVESTMENT VEHICLES $347,109.87 quarterly $10,000 SALLY After 30 years, here's what their accounts would look like: The total value of Charlie's investment has grown to $138,000 (principal and interest). The total value of Kim's investment is $299,599.22. The total value of Sally's account has become $347,109.87. Moreover, if Sally made $50 additional deposits every two weeks during the 30-year period, her balance would increase to $755,859.58! As you can readily see, even though Charlie had three times as much money to invest initially, the compounding investments of Kim and Sally greatly outperformed his investment in the long run. But let's hit a little closer to home. $755,859.58 +50 +50 +50 $100 30h years Most of us don't have a large sum to sink into an investment for thirty years. What would it be like if Sally only had $100 to invest, but she could continue to deposit an additional $100 into the account every month over the full thirty years? At a more real-worldly compounded rate of 8%, let's see how she'd fare: After 30 years, Sally's account would be worth $150,129.52, which still outperforms Charlie's investment! • If she deposited $25 weekly instead of $100 monthly (only $50 more per year), her balance after 30 years would be $165,634.94! COMPOUND INTEREST COMPOUND INTEREST Friend or Foe? Sources: wikipedia.org, marketwatch.com, investopedia Compound interest was once regarded as "Compound interest is the eighth wonder of the world. He who understands it, the worst kind of usury, and was severely condemned by Roman law, as well as the earns it .he who doesn't . pays i" common laws of many other countries, Albern Einstein "O ye who believe! Devour not usury, doubling and quadrupling (the sum lent). Observe your duty to Allah, that ye may be successful." The Qur'an explicitly mentions compound interest as a great sin. Usury (oppressive interest), known in Arabic as "riba", is considered wrong: Qurans30 The Bible addresses the charging of interest in the following manner: " Take no usury or interest from him; but fear your God, that your brother may live with you. You shall not lend him your money for usury, nor lend him your food at a profit." Leviticus 25:36-37 HOLY BIBLE DEFINITION Interest computed on the accumulated unpaid interest as well as on the original principal. When Compound Interest Loan: $1,000 $1,100 $1,210 $1,331 Interest: x10% x10% x10% etc. is your $100 $110 $121' FOE Py x (1+r)^\= FV. Present Value Interest Rate (as a decimal) Number of Periods Future Value With Compound Intereșt, you work out the interest for the first period, add it to the total, and then calculate the interest for the next period, and so on .., like this: The FORMULA Here are the calculations for a 5 Year Loan at 10% Loan at End $1,100.00 $1,210.00 $1,331.00 $1,464.10 $1,610.51 $1,771,56 Interest (x 10%) $100.00 $110.00 $121.00 $133.10 $146.41 $161.05 Loan Start at $1,000.00 S$1,100.00 $1,210.00 $1,331.00 $1,464.10 $1,610.51 YEAR 1 2 3 4 (now) When Compound Interest is your FRIEND FRIEND Let's say you have three friends; Charlie, Kim, and Sally. Each one has money to invest. Charlie has $30,006. Kim and Sally each have $10,000 to invest. Charlie places his money into a 30-year investment whịch pays 12% simple interest annually. Kim and Sally also put their money into 30-year investmenț vehicles at 12% annual interest. However, theirs' is compound interest, with Kim's compounding yearly and Sally's investment compounding quarterly. Friends 12% interest after 30 years $30,000 | 30-YEAR INVESTMENT annually $138,000- CHARLIE 30 -YEAR INVESTMENT $10,000 VEHICLES $299,599.22 annually KIM 30-YEAR INVESTMENT VEHICLES $347,109.87 quarterly $10,000 SALLY After 30 years, here's what their accounts would look like: The total value of Charlie's investment has grown to $138,000 (principal and interest). The total value of Kim's investment is $299,599.22. The total value of Sally's account has become $347,109.87. Moreover, if Sally made $50 additional deposits every two weeks during the 30-year period, her balance would increase to $755,859.58! As you can readily see, even though Charlie had three times as much money to invest initially, the compounding investments of Kim and Sally greatly outperformed his investment in the long run. But let's hit a little closer to home. $755,859.58 +50 +50 +50 $100 30h years Most of us don't have a large sum to sink into an investment for thirty years. What would it be like if Sally only had $100 to invest, but she could continue to deposit an additional $100 into the account every month over the full thirty years? At a more real-worldly compounded rate of 8%, let's see how she'd fare: After 30 years, Sally's account would be worth $150,129.52, which still outperforms Charlie's investment! • If she deposited $25 weekly instead of $100 monthly (only $50 more per year), her balance after 30 years would be $165,634.94! COMPOUND INTEREST