COMPOUNDINTEREST

Compound interest

Compound interest arises when interest is added to the principal of a deposit or loan, so that, from that moment on, the interest that has been added also earns interest. This addition of interest to the principal is called compounding. A bank account, for example, may have its interest compounded every year: in this case, an account with $1000 initial principal and 20% interest per year would have a balance of $1200 at the end of the first year, $1440 at the end of the second year, and so on.

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compound interest

Noun

  1. Interest, as on a loan or a bank account, that is calculated on the total on the principal plus accumulated unpaid interest.


The above text is a snippet from Wiktionary: compound interest
and as such is available under the Creative Commons Attribution/Share-Alike License.

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