How can investors receive compounding returns? A: by selecting a savings account that has a higher interest rate B: by investing their earnings back into their original investment C: by transferring their earnings into a high risk investment D: by diversifying their investment portfolio

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Computers & Technology

Kenzie Gray

26 January, 02:38

How can investors receive compounding returns? A: by selecting a savings account that has a higher interest rate B: by investing their earnings back into their original investment C: by transferring their earnings into a high risk investment D: by diversifying their investment portfolio

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Cecelia Bishop · Answer 1

The answer is (B) by investing their earnings back into their original investment

Investors receive compounding returns as key to maximize their returns from any investment. However, the question is, how can investors receive compounding interests? A penny makes a pound. Thus, with compound interest, investors have to ensure every penny works overtime for them. It is always simple for investors to invest the interest earned back into the main account. Simply, the idea is all about using the same amount of money earned to expand the earnings prospect.

For instance, if you invest in an asset and get some income at the end of one year, you can choose to withdraw the income or leave it in the asset. If you leave it, then the following year, you will have gained an additional income which will create income from the first year.