compound interest

noun

compound interest

interest calculated on both the principal and its accrued interest Compare simple interest

compound interest

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 × 0.05 = $1102.50, after three years it will be $1102.50 × 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 n th year will be P (1 + I) ⁿ. The growth of the compound amount is exponential and not linear.
Compare simple interest

compound interest

Interest that is added not only to the principal of a loan or savings account but also to the interest already added to the loan or account; interest paid on interest.

Discover More

First recorded in 1650–60

Discover More

Examples have not been reviewed.

He explained that the universe expanded like the capital with compound interest.

From

“The problem is that the sponge grows exponentially, like compound interest in a bank,” Swain said.

From

Save for lots of years, and that lump sum keeps building under what is known as compound interest, external.

From

Conversations about credit, investments, and loans, for instance, intersect with lessons on compound interest, matrices, and exponential equations.

From

Investing those extra dollars from tax breaks means couples have more money that can potentially grow and enjoy the benefits of compound interest.

From

Browse