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Today's Topic: Finance – Basics of Compound Interest The Story of Priya's Magic Money Tree 🌳 Priya was a curious girl who loved gardening. One day, her grandfather gave her a unique seed, saying, "This is a magic money tree. If you nurture it, it will grow money over time. But remember, the more you care for it, the faster it grows." Excited, Priya planted the seed and watered it daily. After a year, the tree gave her 100 coins. Her grandfather told her, "Priya, if you leave these 100 coins on the tree, next year they will grow too. The tree will not only produce new coins but also grow coins on the 100 you left." Priya was amazed. She decided to leave the coins. The next year, her tree produced 110 coins because the original 100 coins grew by 10% each year. She learned that every year, the tree's growth multiplied because the coins kept adding to the base. This was her introduction to compound interest—a concept where your money earns money, and that earned money also starts earning money over time. Why is it Powerful? Compound interest is often called the 8th wonder of the world because: It grows exponentially over time. The earlier you start, the bigger the effect due to time. It rewards patience and consistency. Priya's Lesson By the 5th year, Priya's tree produced 161 coins—not just from the original 100, but because the coins grew upon each other. She realized that small efforts (saving and reinvesting) led to big rewards over time.
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