




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


 