Compound interest is the numerical value that is calculated on the initial principal and the accumulated interest of previous periods of a deposit or loan. Compound interest is common on loans but is less often used with deposit accounts.
 | | Term of the Day | Words to Know | | |  | | Compound Interest | | Compound interest (or compounding interest) is interest calculated on the initial principal, which also includes all of the accumulated interest of previous periods of a deposit or loan. Thought to have originated in 17th century Italy, compound interest can be thought of as "interest on interest," and will make a sum grow at a faster rate than simple interest, which is calculated only on the principal amount. | | Read More » | | Related to "Compound Interest" | | | | Learn About Simple and Compound Interest | | Find out the differences between simple and compound interest. Interest is defined as the cost of borrowing money or the rate paid on a deposit to an investor. Interest can be classified as simple interest or compound interest. | | Read More » | | | SPONSORED BY INVESCO | | The Complete Guide to ETFs | | ETFs are becoming increasingly popular and soaring to new heights among investors. Invesco's insights can help you determine if these investment vehicles are right for you. | | Learn More » | | | Continuous Compounding | | Continuous compounding is the process of calculating interest and reinvesting it into an account's balance over a theoretically infinite number of periods. | | Read More » | | | | | | CONNECT WITH INVESTOPEDIA | | | | | | | |
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