Compounding is a process where the interest is credited to the initial amount and interest. If you start with a $2,500 investment, the money that you would have after 18 years is $10,240.
What is compounding?
Compounding is a process where the interest is credited to the initial amount and interest, on the whole, is charged again. and this continues for t period of time.
If an investment is increasing exponentially then it means that investment is compounding. Since Investments increase exponentially by about 60% every 6 years. therefore, we can write that one complete period in which the amount becomes 1.6 times of the original is 6 years.
Now as 1 period is equal to 6 years, therefore 18 years will be equal to 3 periods. Thus, the value of the investment after 18 years will be,
Value = $2,500 × 1.6 × 1.6 × 1.6
= $10,240
Hence, If you start with a $2,500 investment, the money that you would have after 18 years is $10,240.
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