It means that the interest is added to the capital, before calculating the interest for the next period.
For example - to simplify calculations, I'll use a 10% interest rate, and an initial capital of 1000 dollars:
With simple interest, you get 100 dollars every year, 300 dollars in 3 years (for a total capital of 1300 dollars).
With compound interest, the first year you get 100 dollars interest (10% of 1000).
This is added to the capital, so you have a capital of 1100. Next year, you get 10% of 1100 in interest, i.e., 110 dollars.
Now, your capital is 1210 dollars. The third year, you get 121 dollars capital.
After 3 years, with compound interest, you have a capital of 1331 dollars.
This calculation is simplified with powers: Every year, your capital increases by a factor of 1.1, so after 3 years, you have a total of 1000 x 1.1 x 1.1 x 1.1 = 1000 x 1.13 dollars.
It depends on which compound interest formula you mean. Refer to the Wikipedia Article on "Compound Interest" for the correct terminology.
compound... yes it is compound interest.
With compound interest, the interest due for any period attracts interest for all subsequent periods. As a result, compound interest, for the same rate, is greater.With compound interest, the interest due for any period attracts interest for all subsequent periods. As a result, compound interest, for the same rate, is greater.With compound interest, the interest due for any period attracts interest for all subsequent periods. As a result, compound interest, for the same rate, is greater.With compound interest, the interest due for any period attracts interest for all subsequent periods. As a result, compound interest, for the same rate, is greater.
There is simple interest and there is compound interest but this question is the first that I have heard of a simple compound interest.
its compound interest
compound interest increases interest more than simple interest
Compound interest.
There is no carrot in the compound interest formula!
Compound interest
Compound Interest
The interest for 1 year is 37.00, whether it is simple or compound interest.
The effect of compound interest is that interest is earned on the accrued interest, as well as the principal amount.