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Course 102: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Magic of Compounding | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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When you were a kid, perhaps one of your friends asked you the following trick question: "Would you rather have $10,000 per day for 30 days or a penny that doubled in value every day for 30 days?" Today, we know to choose the doubling penny, because at the end of 30 days, we'd have about $5 million versus the $300,000 we'd have if we chose $10,000 per day. Compound interest is often called the eighth wonder of the world, because it seems to possess magical powers, like turning a penny into $5 million. The great part about compound interest is that it applies to money, and it helps us to achieve our financial goals, such as becoming a millionaire, retiring comfortably, or being financially independent. Next: The Components of Compound Interest >> |
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Learn how to invest like a pro with Morningstar’s Investment Workbooks (John Wiley & Sons, 2004, 2005), available at online bookstores. | ||
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