




Compound interest is the payment of interest on both principal as well past accrued interest. The opposite of compound interest is simple interest. Without compound interest a $100 savings account at 10% per year earns a flat $10 in interest each year. After 10 years that non compound interest savings account is worth $200. With compound interest that same $100 savings account earns $10 in interest the first year, but earns increasing amounts of interest in each subsequent year. The reason is that with compound interest, interest is paid on the previous years' interest. After 10 years our $100 savings account with compound interest is worth more than $259. Albert Einstein called compound interest the eighth wonder of the world.
Rate this compound interest definition...




Where is the market headed? The answer may surprise you. Find out with the exclusive & Barron's recommended charts of Chart of the Day. 

Popular Terms: in escrow, whollyowned subsidiary, risk management, phantom income, class C shares, deferred tax, minority interest, 1031 exchange, command economy, stock market close, VIX, 144a, average price per share, cancelled check, deferred revenue, 401a, 1035 exchange, EBITDA, required rate of return, debt service coverage, option premium, current ratio, margin rate, open position, limit order, reverse mortgage, FICO score, Zero Cost Collar, covered put, exdividend, FTSE, real GDP, liquidity ratio, LIBOR, labor relations, balance sheet, implied volatility, Key Rate Duration, irrevocable trust, diluted share, quality assurance, retained earnings, stock split, inflation, APR, exdividend date, dividends payable, annual return, per diem


 