compound interest
Definition
Interest computed on the principle amount to which interest earned to-date has been added. Where compound interest is applied, the investment grows exponentially and not linearly as in the case of simple interest. Formula: Principal x {(Annual interest rate ÷ 100) + 1}^number of years. For example, $1,000 at an annual compound interest rate of 10 percent will, in 5 years, be: 1000 x {(10 ÷ 100) + 1}^5 = $1,6105.51.
compound interest is in the Accounting & Auditing, Banking, Commerce & Finance and Investing subjects.
compound interest appears in the definitions of the following terms:
reinforcing feedback,
compounding,
compound accreted value,
time value of money (TVM),
terminal value,
simple interest,
average annual yield,
discounting,
discount rate,
interest
and
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