What does compound interest mean?

Definitions for compound interest
com·pound in·ter·est

This dictionary definitions page includes all the possible meanings, example usage and translations of the word compound interest.

Princeton's WordNet

  1. compound interestnoun

    interest calculated on both the principal and the accrued interest

Wiktionary

  1. compound interestnoun

    Interest, as on a loan or a bank account, that is calculated on the total on the principal plus accumulated unpaid interest.

Wikipedia

  1. Compound interest

    Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on principal plus interest. It is the result of reinvesting interest, or adding it to the loaned capital rather than paying it out, or requiring payment from borrower, so that interest in the next period is then earned on the principal sum plus previously accumulated interest. Compound interest is standard in finance and economics. Compound interest is contrasted with simple interest, where previously accumulated interest is not added to the principal amount of the current period, so there is no compounding. The simple annual interest rate is the interest amount per period, multiplied by the number of periods per year. The simple annual interest rate is also known as the nominal interest rate (not to be confused with the interest rate not adjusted for inflation, which goes by the same name).

ChatGPT

  1. compound interest

    Compound interest refers to the process of earning interest on both the initial principal and the accumulated interest from previous periods. Unlike simple interest which only accumulates on the principal, compound interest results in a greater return as more interest is earned over time. The frequency at which the interest is compounded—whether yearly, semi-annually, quarterly, monthly, or daily—can significantly affect the total amount of interest earned. Compound interest is often used in various fields such as personal savings, investments, and loans.

Wikidata

  1. Compound interest

    Compound interest arises when interest is added to the principal, so that, from that moment on, the interest that has been added also earns interest. This addition of interest to the principal is called compounding. A bank account, for example, may have its interest compounded every year: in this case, an account with $1000 initial principal and 20% interest per year would have a balance of $1200 at the end of the first year, $1440 at the end of the second year, and so on. In order to define an interest rate fully, and enable one to compare it with other interest rates, the interest rate and the compounding frequency must be disclosed. Since most people prefer to think of rates as a yearly percentage, many governments require financial institutions to disclose the equivalent yearly compounded interest rate on deposits or advances. For instance, the yearly rate for a loan with 1% interest per month is approximately 12.68% per annum. This equivalent yearly rate may be referred to as annual percentage rate, annual equivalent rate, effective interest rate, effective annual rate, and by other terms. When a fee is charged up front to obtain a loan, APR usually counts that cost as well as the compound interest in converting to the equivalent rate. These government requirements assist consumers to compare the actual costs of borrowing more easily.

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Numerology

  1. Chaldean Numerology

    The numerical value of compound interest in Chaldean Numerology is: 1

  2. Pythagorean Numerology

    The numerical value of compound interest in Pythagorean Numerology is: 4

Examples of compound interest in a Sentence

  1. Mignon McLaughlin:

    Albert Einstein when asked what he considered to be the most powerful force in the universe answered: Compound interest! What you have become is the price you paid to get what you used to want.

  2. Justin McCurry:

    Contribute to your 401( k) and push your withholding up to 8 % or 10 % from 6 % or 7 %, your paycheck doesn't go down a lot when you do, but it will add up a lot down the road because of compound interest.

  3. C.S. Lewis:

    Good and evil both increase at compound interest. That is why the little decisions you and I make every day are of such infinite importance.

  4. Warren Buffett:

    Read 500 pages every day. That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.”

  5. Liz Callin of Milwaukee:

    It's an excellent opportunity to teach your teen about the magic of compound interest.


Translations for compound interest

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"compound interest." Definitions.net. STANDS4 LLC, 2024. Web. 19 Apr. 2024. <https://www.definitions.net/definition/compound+interest>.

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