Compound Interest

What is compound interest?

Compound Interest Definition: Compound interest is calculated on the amount of a principal on a deposit, such as a savings or investment account or a loan, and the accumulated interest. Also known as compounding interest, this differs from simple interest, which is solely calculated on the principal.

In contrast, compound interest adds together the previous amount of interest calculated and the principal to arrive at the amount. The longer a principal amount accumulates interest or the number of periods where interest is calculated and added, the more compound interest is calculated on the total. Over time, this type of interest calculation can yield significant returns on investment.

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