Compound Interest
Interest calculated on the principal plus the interest already credited, so earnings themselves start earning.
Compounding is why long horizons matter far more than small rate differences. At twelve weeks and a few hundred dollars its effect is measured in cents.
Interest on interest.
Often confused with
- Simple Interest
- Compound interest re-invests each credit; simple interest leaves the base alone.
Taught in
See also
3.1.A.3