What is compound interest?

+1 vote
Can someone explain this?
asked Oct 11, 2011 in Economics by SiteAdmin ~Rookie~ (216 points)

1 Answer

+1 vote

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.

answered Jan 3, 2012 by anonymous
Some mathematical expressions of compound interest are elaborated on here: http://en.wikipedia.org/wiki/Compound_interest#Mathematics_of_interest_rates