2. Principal and Returns

The money you invest is called your principal. The money that you earn on the investment is your return. Investors always seek to maximize their returns. Banks encourage you to invest your money with them. When you invest, they lend this money onwards to earn additional fees. There is a continual cycle of lending, borrowing, and repayment between the banks and their many customers. To compensate you for your investment with them and for their use of your money while it's in the account, the bank pays interest to you.

investments Compound interest

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