Definition, Meaning & Synonyms

compound-interest

Noun

/ˈkɒm.paʊnd ˈɪn.tɚ.est/

Definition

Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.

Examples

If you invest money in a savings account with compound interest, your savings will grow faster compared to simple interest.
Understanding compound interest can significantly impact your financial decisions regarding loans and investments.

Meaning

This financial concept allows the amount of interest earned or owed to grow exponentially over time, as interest is calculated not just on the original sum but also on the accumulated interest.