- interest paid on both the principal and on accrued interest.
Origin of compound interest
First recorded in 1650–60
Dictionary.com Unabridged Based on the Random House Unabridged Dictionary, © Random House, Inc. 2018
- interest calculated on both the principal and its accrued interestCompare simple interest
Collins English Dictionary - Complete & Unabridged 2012 Digital Edition © William Collins Sons & Co. Ltd. 1979, 1986 © HarperCollins Publishers 1998, 2000, 2003, 2005, 2006, 2007, 2009, 2012
- Interest computed on the original principal plus any accrued interest. Thus if 5% is the rate of interest per year and the principal is $1000, the compound amount after one year will be $1050, after two years it will be $1050 X 0.05 = $1102.50, after three years it will be $1102.50 X 0.05 = $1157.63, and so forth. Mathematically, if P is the original principal and I the rate of interest expressed as a decimal, the compound amount at the end of the nth year will be P(1 + I)n. The growth of the compound amount is exponential and not linear. Compare simple interest.
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