Question

To take advantage of the power of compounding, what should you do with the money an investment produces?

A. Put it in a savings account.

B. Reinvest it.

C. Spend it.

D. Withdraw it.

Answer 1

You should reinvest it. Compounding means that if you put $10 in and it gives you 110% of your investment, then you’ll receive $11. If you reinvest it and it gives 110% again, you’ll have $12.10. This will continue to accrue until you stop investing. If something doesn’t compound, you’ll only get the extra $1 over and over.

Answer 2

B. Reinvest it.

Explanation:

To take advantage of the power of compounding, what should you do with the money an investment produces?

The answer is B. Reinvest it.

Reinvesting means to again put that money somewhere, that will yield interest.

In simpler terms, compound interest means interest on interest. In this way, the amount increases at a faster rate as compared to simple interest.